Welcome back to Human Capital! I’m Melanie Waddell in Washington. This week, Eugene Scalia, the former Gibson Dunn attorney who fought tooth and nail to see that the Obama-era Labor Department fiduciary rule was overturned, may still be able to influence a new DOL fiduciary rule.
Scalia, who President Donald Trump picked to be the new head of Labor, told senators Thursday that he would, if confirmed, seek advice from DOL in-house ethics folks on whether he should participate in crafting a new rule that jibes with the Securities and Exchange Commission’s Regulation Best Interest.
On Tuesday, the Senate Health, Education, Labor and Pensions Committee voted 12-11 on to advance Scalia’s nomination to the full Senate; no Republican senators voted against the nominee.
The question now: Is it too late for Scalia — who was instrumental in helping kill the previous fiduciary rule — to influence a rule, or is it already sewn up? Word on the street is that Labor’s current deputy solicitor, Rachel Mondi, a former Scalia protégé at Gibson Dunn, has had an active hand in devising the new Labor rule, which is said to be in its final stages.
Also on tap: SEC Chairman Jay Clayton will no doubt be peppered with questions about Reg BI as he testifies Tuesday before the House Financial Services Committee.
During his nomination hearing before the Senate HELP Committee, Scalia told Sen. Patty Murray, D-Wash., that he was retained by clients while at Gibson Dunn to address the now-defunct fiduciary rule, which he said “was a controversial rule. Thankfully, the Securities and Exchange Commission has stepped in and itself adopted what’s called a best-interest standard with respect to broker-dealers who are folks that ordinarily are regulated directly by the SEC, rather than by the Department of Labor. Again, having worked at the department before, I’m very mindful of this special role that the department has in protecting pensions and workers’ retirements.”
Fred Reish, partner at Drinker Biddle & Reath, believes Scalia “punted instead of answering” Murray’s question. Scalia “knew that, if he said that he would be involved in developing a new fiduciary regulation, the challenges and questions [during the hearing] would have been intense.” Instead “he said that he would consult with the Department’s Ethics Office and follow their guidance.”
The bottom line: “We still don’t know if he will be involved or not,” Reish said. Steve Saxon, principal at Groom Law Group, agreed that “we just don’t know the answer on the ethics side.”