Rep. Wagner Floats Draft Bill to Replace DOL Fiduciary Rule

While the health care and tax reform debates continue apace in Washington, the ever-present fiduciary discussion also rages on. Fiduciary advocates breathed a sigh of relief in early June when the first phase of the Labor Department’s fiduciary rule became effective, but Rep. Ann Wagner, R-Mo., threw a wrench into the fiduciary rule’s unpredictable path in mid-July when she laid bare a draft bill that seeks to replace the rule and keeps a fiduciary rulemaking under the Securities and Exchange Commission’s jurisdiction.

Wagner’s discussion draft was the focus of a July 13 hearing held by the House Financial Services Capital Markets Subcommittee titled “Impact of the DOL Fiduciary Rule on the Capital Markets.”

Wagner, chairwoman of the House Financial Services Committee’s Oversight and Investigations Subcommittee, and a steadfast opponent of Labor’s fiduciary rule, stated that her draft legislation “would apply a workable best interest standard for broker-dealers when providing investment advice without losing access [to] such advice for millions of low- and middle-income investors.”

Wagner stated that her draft bill also keeps the fiduciary issue “under the jurisdiction of the SEC, the expert regulator who has the experience of overseeing the industry.” Broker-dealers, she said, “should provide advice that is in their customers’ best interest, and this draft bill will make that absolutely clear with a standard that applies to both investment and retirement accounts, unlike Labor’s rule.”

The Wagner bill is similar to other proposals introduced in the House — including House Financial Services Committee Chairman Rep. Jeb Hensarling’s Financial Choice Act, which passed the House and is awaiting Senate action — that would repeal the DOL’s fiduciary rule and “impose a lower standard of fiduciary conduct for broker advice” than is required under the Employee Retirement Income Security Act, says Duane Thompson, senior policy analyst for Fi360.

Thompson believes Wagner’s bill “has very little chance of being signed into law because any final version of the discussion draft is unlikely to survive a Democratic filibuster on the Senate side.”

House lawmakers were moving ahead at press time in mid-July to mark up the Affordable Retirement Advice for Savers Act, H.R. 2823, legislation introduced on June 8 by Rep. Phil Roe, R-Tenn., a member of the House Committee on Education and the Workforce, and Rep. Peter Roskam, R-Ill., chairman of the Ways and Means Subcommittee on Tax Policy, that would also overturn the Obama administration’s fiduciary rule.

H.R. 2823 also requires financial advisors to serve their clients’ best interests and enhances “transparency and accountability through clear, simple and relevant disclosure requirements,” Roe and Roskam said in introducing the bill.

Indeed, Democratic lawmakers on the subcommittee criticized Wagner’s draft bill, stating their dismay that GOP efforts continued to derail the fiduciary rule. “I did not think we were going to have to come back and have this fight all over again,” said Rep. Maxine Waters, D-Calif. “It looks like we’re going to have to.”

Rep. Carolyn Maloney, D-N.Y., another fiduciary rule supporter, argued that Wagner’s draft puts forth a “watered down” standard. “There are bad actors out there,” Maloney said. “We have all had people come to us and say: ‘I put my savings with this advisor and they said they’d be protected. I lost everything.’ The reason this rule was put in place was to protect people.”

But supporters of the draft bill like David Knoch, president of Dallas consulting firm 1st Global, who testified at the July 13 hearing on behalf of the Financial Services Institute, stated that FSI supports Wagner’s discussion draft because “it creates a uniform standard of care enforced by the SEC as the appropriate jurisdictional agency with the necessary expertise, and provides for reasonable and streamlined disclosures as a way to require industry participants to communicate their conflicts.”