As the last of the scheduled comment periods for the Department of Labor’s proposed fiduciary rule closed Thursday, 96 House Democrats have signed a letter calling for further refinements to the rule.
The comment letter, addressed to Labor Secretary Thomas Perez, was first circulated from the office of Rep. Gwen Moore, D-Wisconsin.
It urges the DOL to take a “balanced approach” in both protecting consumer interests while not restricting access to retirement advice for lower and middle-income Americans.
Specifically, the letter raises concerns over the proposal’s controversial Best Interest Contract Exemption, which would require extensive disclosures on commission-based investment products.
Critics of that provision argue it would be costly to implement and expose advisors to too much liability.
That would encourage advisors to move to a fee-based model of compensation, say opponents of the rule, which would discourage providers from offering advice to lower-valued accounts.
The comment letter signed by the 96 House Democrats—more than half in the chamber—does not call on the DOL to withdraw the BIC exemption or the overall rule, but does say that, as proposed, it creates “practical problems for providers to implement.”
The Democrats call on the DOL to take less of a “prescriptive” approach and instead craft a principal-based provision.
“It is vital that the proposal doesn’t limit consumer choice and access to advice, have a disproportionate impact on lower or middle-income communities, or raise the costs of saving for retirement,” write the Democrats.
Moore was one of 30 Democrats to support the Retail Investor Protection Act of 2013, which would have required the Securities and Exchange Commission to be the lead regulator in crafting a new fiduciary rule. That bill is expected to be re-introduced in the coming weeks by Rep. Ann Wagner, R-Missouri.
Barbara Roper, Director of Investor Protection at the Consumer Federation of American, which has been a consistent lobby for a strong DOL fiduciary rule, cautions that the comment letter from House Democrats should not be interpreted as a call to withdraw the rule, delay its finalization, or an insistence that the SEC be the lead regulator.
“We actually see the letter as a positive development,” said Roper. “The changes the Democrats are talking about are not changes that go to the heart of the rule’s protections.”
She said a number of the letter’s signatories are progressives who would not have signed on if they thought it was an attack on the DOL.
But a report in The Hill that a recent meeting between Secretary Perez and several Democrats grew contentious suggests that at least some of the letter’s signatories have significant issues with the proposal.
“The White House and DOL should be very concerned that this many Democrats are expressing very legitimate concerns over this proposal,” said one industry lobbyist familiar with the meeting, according to The Hill’s reporting.