At press time in early January, President-elect Joe Biden and Vice President-elect Kamala Harris completed filling out their economic team — which included announcing their plans to nominate Boston Mayor Marty Walsh, a former top union leader, to head the Labor Department.
If confirmed, a more stringent Labor fiduciary prohibited transaction exemption to align with the Securities and Exchange Commission’s Regulation Best Interest is likely on tap under Walsh.
With a Democratic sweep in the Senate, House and executive branch, Biden “is likely to get all of his Cabinet nominations approved,” Greg Valliere, chief U.S. strategist for AGF Investments, said in his early January email briefing, with the possible exception of Neera Tanden to head the Office of Management and Budget.
Tanden “has Democratic detractors,” Valliere said. “But Biden will not have to spend political capital on his nominations, and he now has the upper hand on judicial appointments.”
Biden also said on Jan. 8 that he planned to “lay the groundwork” for the next COVID economic relief package during the week of Jan. 11. The $900 billion bipartisan COVID relief package passed in December “is an important step, but just a down payment,” Biden said.
All eyes will also be peeled on Biden’s choice to fill the SEC chair seat.
Names being floated to replace SEC Chairman Jay Clayton under Biden include Gary Gensler, former chairman of the Commodity Futures Trading Commission, and Preet Bharara, the U.S. attorney for the Southern District of New York under former President Barack Obama.
Clayton left the agency on Dec. 22. SEC Commissioner Elad Roisman, a Republican, was named interim SEC chair.
Under the Biden administration, “I don’t expect the SEC to scrap Reg BI and start from scratch,” said Barbara Roper, director of investor protection for the Consumer Federation of America. “I do expect [the SEC under Biden] to move relatively quickly to clarify the meaning of best interest, and to do so in a way that represents a clear enhancement over suitability, and to clarify how it determines whether policies and procedures mitigate conflicts of interest.”
Labor Fiduciary PTE
Walsh, a Democrat, was sworn in to serve a second term on Jan.1, 2018. He was previously a member of the Massachusetts House of Representatives, serving in that office from 1997 until 2014 and representing the Thirteenth Suffolk district.
If confirmed as Labor Secretary, all eyes will be on whether Walsh decides to amend or scrap Labor’s fiduciary prohibited transaction exemption to align with the Securities and Exchange Commission’s Regulation Best Interest.
Industry officials anticipate that the Biden administration will pull back Labor’s fiduciary PTE to align with Reg BI and toughen it.
Fred Reish, partner at Faegre Drinker in Los Angeles, said that Walsh “as might be expected,…is pro-labor and fairly liberal. Based on that, I imagine his views of a strong fiduciary standard would be favorable. As a former labor leader, he is also likely to be deeply interested in solving the underfunding issues affecting many multi-employer pension plans.”
Roper said that the Labor Department under the Biden administration will have to address two issues regarding Labor’s fiduciary PTE.
First, “what to do about the PTE and what to do about the definition of fiduciary investment advice,” Roper said. “In both cases, it would take notice and comment rulemaking to reverse or revise the rules, since they were finalized before January 20. And I would expect the DOL to do just that.”