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GOP Reps Demand Proof DOL Didn’t Go It Alone on Fiduciary

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Two top GOP lawmakers told Labor Secretary Thomas Perez on Wednesday to furnish to them by March 18 all of the correspondence between the Department of Labor and the Securities and Exchange Commission regarding DOL’s fiduciary redraft.

Rep. John Kline, R-Minn., chairman of the House Education and the Workforce Committee, and Rep. Phil Roe, R-Tenn., chairman of the Health, Employment, Labor and Pensions Subcommittee, told Perez that a “revised notice of proposed rulemaking” should not be issued by the DOL “until after Congress is satisfied that sufficient coordination has occurred.”

The two lawmakers state that they specifically want to see correspondence regarding the department’s consultation with SEC “as it worked to introduce a new proposal to redefine the fiduciary standard” under the Employee Retirement Income Security Act.

Said Kline: “The public has been assured repeatedly that close consultation between these two agencies was underway to avoid any regulatory confusion and inconsistencies.”

However, he added, “recent statements by a member of the SEC raise serious doubts about whether meaningful consultation has taken place. This rulemaking will affect the retirement security of millions of Americans, and I hope the department has done more than simply pay lip service to good government on this very important issue.”

Kline noted recent concerns raised by SEC Commissioner Daniel Gallagher that he has “not seen” the DOL’s reproposal, which Gallagher said is “curious” given the SEC’s “comprehensive oversight authority with respect to the investment advisors and broker-dealers who would be impacted” by the DOL fiduciary redraft.

Kline and Roe stated that Gallagher’s remarks are “inconsistent with public pronouncements from the administration,” citing, for example, testimony Phyllis Borzi, assistant secretary for Labor’s Employee Benefits Security Administration, gave before the HELP Subcommittee that DOL, SEC and others “are actively consulting with each other and coordinating our efforts.”

This “pledge,” the lawmakers state, “was echoed in the press release withdrawing the initial rule. More recently, Assistant Secretary Borzi has publicly repeated this promise.”

SEC Chairwoman Mary Jo White said recently that the SEC has been providing “technical assistance” to DOL regarding its fiduciary rule, which the department has been reworking since pulling the original 2010 version.

But fiduciary advocates remain convinced that congressional efforts to stop a DOL redraft from emerging from the Office of Management and Budget won’t prevail.

Despite the “hue and cry” over the DOL’s redraft of its rule to amend the definition of fiduciary on retirement accounts, the redraft “will emerge” from OMB, Neil Simon, IAA’s vice president for government relations, said Thursday at IAA’s annual compliance conference in Arlington, Virginia, just outside Washington.

While some rules fall into a “black box” while being reviewed by OMB and never reappear, the DOL’s fiduciary redraft “is not one of them,” Simon said, particularly since it has Obama’s backing.

Simon told ThinkAdvisor on Friday that while it is “possible, of course, that Congress could prevent DOL from proceeding, it would take 60 votes in the Senate” to stop a proposed rule from surfacing because a White House “veto would be likely.”

Kline and Roe also pointed to legislation reintroduced recently by Rep. Ann Wagner, R-Mo., which passed the House in the last Congress on a “strong bipartisan basis.” The reintroduced bill, the Retail Investor Protection Act, requires DOL to delay its rulemaking until after the SEC acts.

— Check out Lou Harvey: Obama Just Blew Up Your Business Model; Here’s What to Do on ThinkAdvisor.

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