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Regulation and Compliance > Federal Regulation > DOL

FSI Vows to Continue Fighting DOL Fiduciary Rule

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The Financial Services Institute’s annual OneVoice conference for broker-dealer home office personnel is part family gathering and part sizing up the competition, but always a celebration of the independent broker-dealer business model, particularly its advocacy successes. When it comes to FSI’s top advocacy priority of the last few years — the Department of Labor’s redefinition of fiduciary under the Employee Retirement Income Security Act — there was no celebrating at this year’s conference in Orlando. However, FSI’s advocacy leaders vowed to keep fighting, though they also counted advocacy successes in 2015.

At an early-morning meeting with the media on Tuesday, president and CEO Dale Brown said that fight was a success, citing FSI members who he said sent “thousands” of messages to regulators and legislators opposing the rule. When asked by a reporter why FSI “lost” its fight, Brown replied that President Barack Obama’s support for the rule “was a game changer,” helped by continued “gridlock” in Congress. “We’ll continue to champion a fiduciary standard” for advice givers, he continued, but reiterated that DOL’s “proposal as written is unworkable.” When asked by another reporter if FSI would consider taking legal action against the rule, Brown said “we’re not ruling out any action.”

When asked if FSI would consider using its political action committee money to support a presidential candidate, Brown said that FSI would continue its policy of not doing so, though it would also continue to donate to congressional candidates.

David Bellaire, who oversees FSI’s advocacy efforts as executive vice president and general counsel of the IBD group, said that “at the Department of Labor there’s a perspective that doesn’t jibe with reality,” while current FSI chair Amy Webber said the DOL rule would create “three potential” fiduciary standards. She said that the dispute over the DOL rule was not one of a difference of “intentions” by its promoters and detractors in terms of fiduciary, but rather the best way to apply a fiduciary standard, or “the how.”

Later in the morning at a general session focusing on regulatory and compliance issues, Bellaire vowed that FSI would continue to fight against the DOL rule, which he said had become a cornerstone of Obama’s domestic agenda in his second term despite the “irreparable harm” it will cause to investors.

The DOL rule is not the only advocacy issue on FSI’s agenda, its leadership pointed out. With a strong bottom line and strong membership numbers — FSI had $8.9 million in revenue in 2015, “more than two dozen staff” and 35,000 financial advisor members — Brown said the advocacy theme for FSI in 2016 would be “momentum.” Its advocacy successes in 2015 included blocking the Financial Industry Regulatory Authority’s Comprehensive Automated Risk Data System (CARDS) proposal, along with “dozens of other issues,” Bellaire said, such as “engaging with the SEC” to help form a “level playing field” for RIAs and broker-dealers; reducing fees and taxes on FAs in Texas, supporting industry efforts to combat cybersecurity threats and counter elder financial abuse, along with the perpetual fight to maintain independent contractor status for IBD reps.

FSI expects much of its advocacy in 2016 — under a new strategic plan just finalized by its board — to focus on the states rather than federal regulators and legislators. In the media meeting, Bellaire said that he didn’t expect much action from Congress this year on issues of interest to FSI members, though there may be some action during the lame duck session after the congressional and presidential elections in November. On the regulatory side in Washington, Bellaire said Sen. Richard Shelby has indicated he would not bring up for Senate approval the two nominated SEC commissioners until “after his primary in March.” With FINRA CEO Richard Ketchum departing this year, Bellaire also doesn’t expect major rulemakings at FINRA until a successor is named.

Saying that the states are where the action will be this year, Bellaire said one area of focus for FSI would be on state-run retirement plans. While FSI “supports connecting” workers with retirement plans, it opposes auto-IRAs, such as have been proposed in Illinois, New Jersey, Maine and other states. Bellaire said auto-IRAs, where workers who do not have employer-sponsored retirement plans are forced into state-run plans, present “issues for the states,” but FSI is focused on the role of advisors. “You need financial advisors to help workers plan” for their retirement, Bellaire said. In meetings with state legislators and regulators, Bellaire said FSI is presenting white papers that detail the costs to states were they to institute auto-IRAs.

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