House committees ready two assaults on DOL fiduciary rule this week

One is a vote on a bill to kill Labor's rule and replace it with a disclosure-based best-interest standard, while another will take up legislation to prevent funding for enforcement of the regulation

Jul 17, 2017 @ 1:56 pm

By Mark Schoeff Jr.

Two House panels are poised this week to launch assaults on the Labor Department's fiduciary rule.

On Wednesday, the House Education and the Workforce Committee will vote on legislation that would repeal the regulation and replace it with an advice standard based on disclosure. Also on Wednesday, the House Appropriations Committee will take up a DOL funding bill for fiscal 2018 that contains a rider that would prevent the agency from enforcing the fiduciary rule, which requires financial advisers to act in the best interests of their clients in retirement accounts.

Both measures are certain to pass their respective panels because of the Republican majorities on each.

"For years, this committee has led the fight against the reckless fiduciary rule promulgated by the Obama administration and has promoted commonsense solutions to strengthen protections for retirement savers," Rep. Virginia Foxx, R-N.C., chairwoman of the Education and the Workforce Committee, said in a statement. "This legislation represents the next step in our effort to ensure all Americans have access to affordable retirement advice that's in their best interests."

The bill, written by Rep. Phil Roe, R-Tenn., was introduced in June and would establish a best-interest standard that can be met through disclosures.

For instance, the legislative text suggests that advisers use this language to explain that their compensation fluctuates depending on the type of investment product clients purchase: "This recommendation may result in varying amounts of fees or other compensation to the person providing the recommendation (or its affiliate), and the same or similar investments may be available at a different cost (greater or lesser) from other sources."

In a letter to the committee today, the Consumer Federation of America denounced the bill as a weak substitute for the DOL rule. Supporters of the regulation assert that it forces brokers to mitigate conflicts. Brokers currently meet a suitability standard when selling products, which is less stringent than the fiduciary standard applied to investment advisers.

"This bill would leave retirement savers with fewer protections than they enjoyed before the DOL rule was finalized," the letter states. It "would give [advisers] free rein as long as a few poorly worded boilerplate disclosures were provided. The proposed disclosures would give investors no idea of the magnitude of the conflicts involved."

This week's House activity follows a July 13 hearing in the House Financial Services Committee that focused on a separate bill written by Rep. Ann Wagner, R-Mo., that also would kill the DOL rule. Ms. Wagner's measure would replace it with a best-interest standard outlined in the bill that would be proposed by the Securities and Exchange Commission.

The Republican majority in the House gives the bills a good chance of gaining approval by the full chamber. In the Senate, however, they face a potential Democratic filibuster. Most Democrats have supported the DOL fiduciary rule since it was finalized in April 2016.

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