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Regulation and Compliance > Federal Regulation > DOL

DOL Fiduciary Rule Supporters Flock to Capitol Hill to Brief Lawmakers

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What You Need to Know

  • A briefing was set up in response to questions from Hill staffers ahead of a fiduciary rule proposal that is expected to be finished this spring.
  • Making investors sign complicated, carefully worded agreements they don't understand isn't cutting it, a law professor told the committees.
  • Groups participating in the briefing have worked together over the years in support of a fiduciary standard.

Members of several Senate and House committees spent Valentine’s Day getting briefed on the need for the Labor Department’s anticipated new fiduciary rule.

Representatives from the Public Investors Advocate Bar Association (PIABA), AARP, AFL-CIO and Better Markets, as well as the Certified Financial Planner Board of Standards, headed to Capitol Hill Monday to brief staff members with the House Education and Labor and Financial Services committees, as well as the Senate Banking and Health, Education, Labor and Pensions (HELP) committees.

“The Hill briefing was set up in response to questions some folks were getting from Hill staff in anticipation of a proposed rule” from Labor, Maureen Thompson, vice president of public policy for the CFP Board, told ThinkAdvisor Tuesday in an email.

Groups participating in the briefing “have worked together over the years in support of a fiduciary standard for investment advice generally and retirement investment advice specifically,” Thompson said.

The Senate HELP Committee approved by a 12-9 vote on Jan. 14 the nomination of Lisa Gomez to head the Labor Department’s Employee Benefits Security Administration, the agency overseeing retirement plan rules.

Her nomination now moves to the full Senate. If confirmed, Gomez will be the point person charged with shepherding Labor’s fiduciary rule.

Labor’s fall regulatory agenda listed December as the date for issuing its new fiduciary rule proposal, which means when the rule would be sent to the Office of Management and Budget for review. That review, in turn, could take from 60 to 90 days.

As of Tuesday, the rule had not landed at OMB.

Industry officials anticipate a rulemaking may be released sometime in the spring.

“Brokers are able to carve themselves out of ERISA by using carefully drafted IRA agreements,” Christine Lazaro, professor of Clinical Legal Education and director of the Securities Arbitration Clinic at St. John’s University School of Law, who represented PIABA, told the committees during the briefing. “These contracts state that the broker’s advice ‘will not be on a regular basis’ or ‘will not serve as the primary basis for the investment decision.’”

Unfortunately, she continued, “while these contracts may set forth these limitations in a writing that is signed by the investor, they do not reflect the investor’s expectations or the reality of the situation. Financial advisors know that investors do not scrutinize the documents that are put in front of them. They know their clients trust them, and they often exploit that trust by having their clients sign documents that do not accurately reflect their verbal agreements.”

PIABA, Lazaro said, regularly sees “clients who have signed documents they have not read and do not understand simply because their broker told them to sign them.”

Said Lazaro: “Rather than allowing brokers to use technical agreements and contracts to limit their responsibilities to their clients, we must ensure that retirement investors receive the regulatory protections they rightfully expect. That’s what the DOL is proposing to do, and why PIABA, on behalf of our members’ clients, supports the DOL’s efforts.”

According to Labor, its planned rulemaking would amend the regulatory definition of the term fiduciary “to more appropriately define when persons who render investment advice for a fee to employee benefit plans and IRAs are fiduciaries within the meaning of section 3(21) of ERISA and section 4975(e)(3) of the Internal Revenue Code.”

The amendment, Labor said, “would take into account practices of investment advisors, and the expectations of plan officials and participants, and IRA owners who receive investment advice, as well as developments in the investment marketplace, including in the ways advisors are compensated that can subject advisors to harmful conflicts of interest.”

CFP Board Chairwoman Kamila Elliott told committee members that “CFP Board has long advocated for a federal fiduciary standard for all investment advice. For more than a decade we urged the Securities and Exchange Commission to move forward on a fiduciary rulemaking. We supported the Department of Labor’s [now defunct] 2016 rule to update the fiduciary obligation for retirement investment advice.”

Clearly, Elliott said, “people investing their hard-earned savings for a financially secure retirement deserve to know that the financial professional advising them is working solely in their interest. We call on the Department Labor to issue proposed rules designed to update and modernize requirements that reflect the reality of today’s marketplace.”


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