The Department of Labor’s plan to revamp the definition of fiduciary under the Employee Retirement Income Security Act is likely to face yet another legislative hurdle.
Industry trade groups are working on a bill that would “legislate a best-interest standard,” Steve Saxon, chairman of Groom Law Group, told reporters Monday after his comments at the Insured Retirement Institute’s Government Legal & Regulatory Conference in Washington.
Barbara Roper, director of investor protection at the Consumer Federation of America, told ThinkAdvisor in a Monday email that trade groups are, indeed, working on best-interest legislation, and that it remains unclear if such a bill will be based on best interest standards that were put forth recently by the Securities Industry and Financial Markets Association and the Financial Services Roundtable, “or something entirely different.”
What can be expected, however, Roper argues, is that such legislation — expected to be introduced soon — “would give lip service to best interest without doing anything to rein in common industry practices that encourage advisors to act against their customers’ interests. That’s something [the SIFMA and FSR] proposals seem to have in common.”
SIFMA’s “uniform best-interests-of-the-customer legal standard for broker-dealers” would apply to all retail brokerage accounts, and seeks to correct the potentially conflicting fiduciary rules to be issued by DOL and the Securities and Exchange Commission.
Indeed, former SEC Commissioner Troy Paredes noted at the IRI event that he’d like to see the SEC become the agency that “has the lead” on a fiduciary rulemaking.
Lawmakers, too, will press ahead during the upcoming October appropriations process to defund DOL’s plan, Saxon said. Both the House and Senate appropriations committees have recently passed bills to prohibit DOL from using any of its funds to finalize, implement or enforce its fiduciary rulemaking.
Rep. Ann Wagner’s bill, H.R. 2374, the Retail Investor Protection Act, which would require the DOL to wait to repropose its rule until the Securities and Exchange Commission issues its own fiduciary rulemaking, “will continue to be supported,” said Saxon, who has been critical of DOL’s redraft.
Of course, these bills face a “huge hurdle” in overcoming a presidential veto, Saxon conceded. “The White House is in support of the general direction that the DOL is going” with its fiduciary redraft.