Sen. Elizabeth Warren, D-Mass., is warning Labor Secretary Eugene Scalia to not propose a “weak” fiduciary rule that would allow financial advisors “to put their own interests above the interests of working families saving for retirement.”
In a letter to Scalia on Wednesday, Warren cited the anticipated Labor conflict-of-interest rule to replace the Labor rule that was vacated last year by the U.S. Court of Appeals for the 5th Circuit. The Trump administration declined to appeal that ruling.
Labor’s regulatory agenda had said a proposed rule would be out by December, but nothing had been filed at the Office of Management and Budget as of Thursday.
In her letter, Warren told Scalia that she was concerned “DOL may simply copy the wholly inadequate standards of conduct framework” developed by the Securities and Exchange Commission’s Regulation Best Interest, “including the Investment Adviser Interpretation and Form CRS disclosure.”
Said Warren: “That would be a costly mistake — those standards not only allow broker-dealers to give clients advice that is not in their best interest, but significantly water down the longstanding fiduciary standard that has protected the clients of investment advisers for decades.”
As Labor “imminently prepares” to release a new fiduciary rule, Warren asked Scalia to answer a bevy of questions by Dec. 18, including whether Labor will define “best interest,” which the SEC did not do in Reg BI.
She also wants to know if Labor’s new fiduciary plan will include “any new studies or analyses about the effects of conflicts of interest on retirement savers” supporting the plan.
Barbara Roper, director of investor protection for the Consumer Federation of America, told ThinkAdvisor on Thursday in an email that “Sen. Warren’s letter reflects a good understanding of the many weaknesses in the SEC rule and why it should not form the basis for a DOL rule. Among other things, the SEC rule doesn’t comport with section 913(g) [of Dodd-Frank], which the 5th circuit identified as the appropriate basis for rulemaking in overturning the earlier DOL rule.”
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