DOL acting before SEC on fiduciary rule is 'failure in public policy'

The SEC had a mandate to set a fiduciary standard, but failed to do so before the DOL

Apr 7, 2016 @ 4:57 pm

By Greg Iacurci

The Department of Labor's move to set a uniform fiduciary standard on investment advice before the Securities and Exchange Commission represents a policy breakdown on the part of the U.S. government, according to an official with the major trade organization for the financial services sector.

The Labor Department yesterday issued the final version of its “conflict of interest” rule, which raises investment advice standards for retirement accounts by making a fiduciary of anyone giving advice to 401(k) plans and individual retirement accounts.

Critics of the rule, such as the Securities Industry and Financial Markets Association, had long championed the notion that the DOL should wait until the SEC undergoes a fiduciary rulemaking exercise before going ahead with its rule.

“From SIFMA's standpoint, to have the DOL issue this now-final rule is bit of a failure in public policy,” said Ira Hammerman, executive vice president and general counsel at SIFMA.

The Dodd-Frank Wall Street Reform and Consumer Protection Act signed into law in 2010 gave the SEC, as the primary regulator of the securities industry, discretionary authority to regulate a uniform fiduciary duty for investment advice, Mr. Hammerman said, adding that its inability to do so constitutes the policy failure.

SEC chairwoman Mary Jo White has indicated she supports a uniform fiduciary standard, but told legislators there's no guarantee the commission will draft its own rule.

The DOL's final rule could increase the pressure on the SEC to do so, but they won't necessarily have to, according to Mr. Hammerman, who spoke Thursday at SIFMA's private client conference in New York.

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