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DOL fiduciary rule opponents shift strategy

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A cohort of lawmakers in the House of Representatives, including two Democrats, has penned a letter to Labor Secretary Thomas Perez, calling on him to scrap the existing proposed fiduciary rule and re-propose a new regulation that accounts for stakeholders’ concerns.

Rep. Ann Wagner, R- Missouri, who introduced the Retail Investor Protection Act in 2013, a law that would require the Securities and Exchange Commission to take the lead in writing a new fiduciary standard and that passed the House before stalling in the Senate, was the lead signatory to this most recent letter.

She was joined by 17 other Republicans and two Democrats, William Clay, D-Missouri and David Scott, D-Georgia.

Rep. Clay, a member of Congressional Black Caucus, serves the 1st District of Missouri, which abuts Rep. Wagner’s district. The two districts encompass a large swath of the greater St. Louis metro region, home to Edward Jones, Stifel Financial, Wells Fargo Advisors, and Scottrade—brokerages with large stakes in the debate over the wisdom of the DOL’s proposed rule.

The letter represents a new strategy by opponents of the DOL’s rule-making process.

It does not call for the SEC to take the lead in writing a new uniform fiduciary standard for the broker-dealer industry, as the Retail Investor Protection Act did.

Nor does the letter expressly challenge the DOL’s jurisdiction over the IRA market, which would be fundamentally transformed by the rule, say both opponents and proponents of the DOL’s rule.

But it does suggest that the vast range of comments in opposition to the rule could mean the DOL will end up finalizing a regulation fundamentally different from its proposal, and that in effect would require further review from industry stakeholders.

“There is a strong possibility that a final rule may widely differ in its substance from the initial proposal or contain provisions that were not part of the proposed regulation,” wrote the lawmakers.

“As a result, we feel it is in the interest of our constituents that the DOL re-propose this fiduciary regulation to ensure adequate stakeholder involvement in the notice and comment period during a new formal rulemaking process,” they added.

The letter echoed previous criticisms of the DOL’s rule, which speculate the extent of disclosure requirements, codified in the Best Interest Contract Exemptions, would discourage retirement providers from servicing smaller and midsized accounts.

“The current proposal would bi-furcate the industry into those who can afford an advisor and those who cannot,” argued the lawmakers.  “The result will be less choice for consumers and a lack of access for retail investors to sound financial advice.”

The Retail Investor Protection Act passed the House in 2013 by a vote of 254 to 166, with 30 Democrats voting in support of the measure.

While a cohort of Democrats did urge Labor to extend the comment period, which it obliged, few have come out against the rule, as did Rep. Clay and Rep. Scott.

Questions as to whether or not more bi-partisan support against the DOL’s rule is expected, put to Rep. Wagner’s staff, were not answered before going to press.


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