As anticipated, the Department of Labor sent late Thursday its rule to redefine fiduciary on retirement advice to the Office of Management and Budget for its mandatory review.
Arrival of the rule, formally the Conflict of Interest Rule — Investment Advice, was announced on OMB’s website Friday morning. If put through an expedited review of what industry observers say would likely last 50 days, rather than the typical 90-day review, that would mean DOL would issue the rule before April.
Labor Secretary Thomas Perez had said on a late Monday call with reporters that DOL hopes its rule to change the definition of fiduciary under the Employee Retirement Income Security Act will “reach a conclusion in the coming months.”
The proposed rule set out an eight-month compliance date. After release of the final rule, Congress has 60 legislative days to adopt a joint resolution of disapproval, if it opposes the regulation. President Barack Obama would likely veto such a resolution.
Rep. Ann Wagner, R-Mo., who sponsored H.R.1090, the Retail Investor Protection Act, which would stop progress on DOL’s rule until the Securities and Exchange Commission writes its own fiduciary rule, said late Thursday afternoon that her fight against DOL’s rule “is far from over.” She vowed to continue pushing her bill, passed by the House, which she said would “preserve low- and middle-income Americans’ access to sound investment advice.”
American families, Wagner said, “are already facing a savings crisis and the president’s insistence on pushing this rule forward will only make the problem worse.” DOL, she continued, “has ignored Congress, thumbed its nose at the thousands of Americans who have expressed concerns about the impact this rule will have on family savings and jobs, and has charged blindly forward with this executive overreach.”
Ken Bentsen, president and CEO of the Securities Industry and Financial Markets Association, urged OMB to put DOL’s rule through a “comprehensive” cost-benefit review. “The OMB has a statutory mandate to get this right,” he said. “To do so, it must fully assess the economic impact of the DOL’s rule to ensure it serves the best interest of American investors without making saving harder and causing them undue harm.” During its annual OneVoice conference this week, the Financial Services Institute vowed to continue to fight DOL’s rule, with President and CEO Dale Brown saying the group was “not ruling out any actions” to stop implementation of the rule.
Barbara Roper, director of investor protection for the Consumer Federation of America and a staunch advocate of DOL’s rule, told ThinkAdvisor Friday morning that the filing of the rule at OMB ”brings us one step closer” to achieving the goal of ensuring that retirement savers get “objective advice, and not just a sales pitch dressed up as advice.”
By getting the rule to OMB early in the year, “DOL greatly reduces the chances that Congress will be able to overturn the rule using its authority under the Congressional Review Act,” Roper said. ”While Congress may have the votes to pass a joint resolution of disapproval, President Obama would be sure to veto it.”
The rule landing at OMB “is an important milestone, particularly in light of the millions of dollars industry groups have spent to preserve the status quo,” Roper said, adding that DOL “deserves enormous credit for persevering in the face of that relentless opposition.”
In a blog posting for ThinkAdvisor, Knut Rostad of the Institute for the Fiduciary Standard addressed the rule. He said the DOL, the CFP Board of Standards and the Institute “reject the premise of ‘Conflicts Are OK,’ and instead, to varying degrees, believe that conflicts of interest are a major problem to be avoided at all costs.”
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