House Committee approves bill to slow DOL, SEC fiduciary rulemaking

If it gets through House, Senate passage unlikely but the idea is out there

Jun 19, 2013 @ 5:33 pm

By Mark Schoeff Jr.

DOL, SEC, fiduciary, wagner
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The House Financial Services Committee gave bipartisan approval today to legislation that would place new requirements on the Labor Department and the Securities and Exchange Commission efforts to craft new rules to strengthen investment advice standards.

Under the measure, the DOL could not propose a rule that would expand the definition of “fiduciary” for anyone providing investment advice to retirement plans until 60 days after the SEC proposed a separate uniform fiduciary duty rule for retail investment advice.

Critics of the legislation, written by Rep. Ann Wagner, R-Mo., contend that the mandate could effectively kill the DOL effort. The agency is poised to re-propose its fiduciary-duty rule this year, while the SEC has not yet decided to advance its own rule.

Bipartisan skepticism about the pending DOL rule was demonstrated by the support of 13 Democrats for Ms. Wagner's bill. The DOL originally proposed a rule in 2010 but withdrew it after fierce opposition from the financial industry, which argued that it would subject the sale of individual retirement accounts to fiduciary duty.

Ms. Wagner said that the agencies' “massive rule making” could raise regulatory costs and limit access to investment advice for people trying to save for retirement, college or a home.

“While such an undertaking has been sold as a pro-investor initiative, it appears that neither the SEC nor the DOL considered the serious adverse consequences that would befall retail investors if these rules move forward,” Ms. Wagner said.

Alleviating investor confusion about the different standards that investment advisers and brokers must meet could be done through improved disclosure rather than a rewrite of federal securities laws, according to Ms. Wagner.

The top-ranking Democrat on the committee voted against the bill, saying that it would place redundant requirements for cost-benefit analysis on the SEC.

“This appears to be yet another attempt to bog the SEC down to the point where they're unable to put forward a rule making — even a rule making related to the crucial issue of protecting the hard-earned retirement savings of millions of American families,” said Rep. Maxine Waters, D-Calif., committee ranking member.

Under a uniform fiduciary standard, brokers would be required to act in the best interests of their clients — something that investment advisers already must do. Currently, brokers are held to a less stringent suitability standard when they sell investment products.

Several investor advocate groups warned lawmakers in a letter today that Ms. Wagner's bill would place “unnecessary and onerous” requirements on both the DOL and the SEC.

“Together, these provisions in [the bill] would prevent two agencies from moving forward with appropriate notice and comment rule making related to the fiduciary standard of conduct under their respective statutes, to the detriment — not protection — of investors,” stated the letter signed by the Certified Financial Planner Board of Standards Inc., the Investment Adviser Association, the Consumer Federation of America, the North American Securities Administrators Association Inc., the National Association of Personal Financial Advisors, the Financial Planning Association and AARP.

Ms. Wagner's bill also was referred to the House Education and Labor Committee, which has jurisdiction over the DOL. If it gets through that panel, it goes to the House floor for a vote by the full chamber, which is controlled by Republicans. The measure's prospects in the Democratic-majority Senate are poor.

Nonetheless, the measure — along with several bipartisan letters expressing reservations about the DOL fiduciary rule — puts pressure on the DOL.

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