This week, opponents of the Department of Labor’s proposed fiduciary rule are “vigorously advocating” for a rider to the omnibus spending bill that would require the agency to open an additional comment period before publishing a final rule, according to a letter from the Financial Planning Coalition to members of Congress.
But requiring a new comment period would effectively prevent the DOL from finalizing a fiduciary rule before the end of the Obama Administration, argues the FPC, which advocates on behalf of a uniform fiduciary standard of care for all investment advisors.
The letter implores lawmakers to communicate their opposition to such a rider to Democratic leadership.
But one moderate Democrat that has factored prominently in the fiduciary debate has led the call for an additional comment period before the DOL finalizes its rule.
Last month, Rep. Jared Polis, D-Colorado, also circulated a letter on Capitol Hill that was addressed to Labor Secretary Thomas Perez.
“Given your Department’s commitment to transparency and public input, we request that upon determining the specific changes the DOL will make to the Rule, you open a 15-30 day comment period prior to finalizing the Rule,” writes Polis in the letter.
“Otherwise, it will be harder to discern if the Rule can be implemented without unintended consequences, particularly regarding the provision of high-quality financial advice to low and middle income American families,” said Polis.
Karen Nystrom, director of advocacy for the Financial Planers Association, which is part of the FPC, says Rep. Polis’s hope to open another comment period is misguided.
“Another comment period would run out the clock on the Administration’s ability to promulgate a final rule,” said Nystrom in an interview.
Comment periods are “not a simple matter,” she said, as the DOL would be under significant procedural requirements if it were to open another review.
Barbara Roper, director of investment protection at the Consumer Federation of America and a prominent advocate for the DOL’s fiduciary rule, is certain a new comment period, however short, would eliminate the DOL’s ability to finalize a rule in this Administration.
The math is clear, argues Roper. In her best estimate, the DOL will release its rule by mid May 2016, a timetable in line with DOL’s indications. That already puts the DOL on a tight schedule, as the Congressional Review Act requires Congress a 60-day review period all major rulemaking.
Once the DOL finishes its revisions to the rule, it would have to be reviewed by the Office of Management and Budget’s Office of Information and Regulatory Affairs. If that review is expedited, Roper says it could take 50 days, but that 95 days is more typical for a rule of “this magnitude.”
The OMB may then have comments and questions for the DOL, which would have to be addressed. All of that has to happen before Congress has its required 60 days to assess the rule under the Congressional Review Act, according to Roper.
“Another 15 to 30 day comment period doesn’t just add 15 to 30 days to the schedule,” Roper told BenefitsPro.
“DOL would then have to prepare those comments for release after they review and analyze those comments,” she said.
Roper says industry can be expected to flood the DOL with technical comments, all demanding substantive responses.
If DOL rushes that process, opponents of the rule will inevitably use that in legal challenges to the rule, she said.
If the DOL takes the appropriate time to analyze new comments, they lose the chance of finalizing a rule before President Obama leaves office.
“It’s just not realistic,” said Roper.
For his part, Rep. Polis has gone to some length differentiating himself from DOL opponents that want to defund the DOL’s ability to enforce a fiduciary standard.
He recently voted against the Retail Investor Protection Act, which passed the House on mostly party lines—only three Democrats voted in favor of the bill, which would kill the DOL’s efforts to finalize a rule by requiring the Securities and Exchange Commission to be the lead regulator in creating a fiduciary standard.
But last week he confirmed his hope for a new 15 to 30 day comment period during a Health, Employment, Labor and Pensions subcommittee hearing in the House, on which he is the ranking member.
In that hearing, he said Congress’ goal “should not be a (legislative) product that prevents an enforceable conflict of interest standard from being implemented, but rather furthers it.”
Today, Rep. Polis’s spokesperson confirmed the lawmaker’s support for a new comment period, but underscored he would oppose any effort by Republicans to de-fund the DOL’s ability to implement a rule.
“It is well within DOL’s ability to open a brief comment period without disrupting the department’s goal of finalizing the rule before the President leaves office,” said Polis’s spokesperson.
“Rep. Polis strongly supports implementing an updated fiduciary rule based on public input, and he would not support any effort that he believed would prevent DOL from finalizing the rule before the end of the current administration,” added the spokesperson.
Questions to Rep. Polis’s office as to whether or not DOL advocates’ break down of the regulatory timeline involved in a new comment period are accurate, and whether or not his hope for a new comment period plays into the hands of DOL opponents’ strategy, were not returned before publication.
As far as Roper and other advocates of the DOL’s fiduciary rule are concerned, Polis’s insistence on a new comment period is a deal killer.
“I am not able to comment on Rep. Polis’s motives,” said Roper.
“But I am absolutely confident, however, that the industry lobbyists who came up with this plan knew exactly what they were doing, and what they are doing is trying to kill the rule,” she added.