Provision of House spending bill would kill DOL fiduciary rule

GOP's regulation-killing rider has failed in previous years, but investor advocates remain wary

Sep 13, 2017 @ 1:52 pm

By Mark Schoeff Jr.

+ Zoom

The House is moving toward approval of a spending bill that contains a provision to kill the Labor Department's fiduciary rule, the latest attempt by congressional Republicans to use legislative means to stop the regulation.

The House was set to vote on more than two dozen amendments to the appropriations measure Wednesday afternoon. The bill, along with the so-called rider on the DOL rule, is headed for certain approval by the end of the week.

But the $1.23 trillion bill that would fund government operations for fiscal 2018 has dim prospects in the Senate, due to opposition from Democrats to funding levels and various policy provisions. But the fact the DOL rider will get through the House means it's once again in play, as it has been in previous years during budget negotiations.

"Things moving in either chamber can have an impact," said Lisa Gilbert, vice president of legislative affairs at Public Citizen, an advocacy group that opposes the many policy riders contained in the House funding bill. "It's going to be a fight to get them all out."

For now, budget battles have been postponed until late in the year, thanks to a bill approved by Congress last week that maintains current levels of government funding until Dec. 8. At that point, lawmakers will have to come to another agreement on a so-called continuing resolution or on a fiscal 2018 package such as the one the House is about to approve.

It's during those negotiations that the fate of the DOL fiduciary rider will be decided.

Supporters say the rule, which requires brokers to act in the best interests of their clients in retirement accounts, mitigates broker conflicts of interest that lead to the sale of inappropriate, high-fee investments that erode savings. Republican and industry opponents say the rule is too complex and costly and would make advice too expensive for investors with modest assets.

In previous years, Senate Democrats have coalesced to defend the DOL rule. But several moderate Democrats who are up for re-election in states carried by President Donald J. Trump also have been among the Senate skeptics of the DOL rule. It's unclear whether enough Democrats could be persuaded to support the rider to overcome a filibuster.

"I'm hopeful it won't become a political hot potato in that context," said Steve Hall, legal director at Better Markets, an investor advocacy group. "It's hard to assess."

Kate McBride, founder of advisory firm FiduciaryPath and past chairwoman of the Committee for the Fiduciary Standard, also is hesitant to make a forecast.

"The political situation in Washington is so unpredictable this year," Ms. McBride said. "I'm hopeful [Democrats] will stick together, as they have in the past, on this really important issue and ensure that retirement investors can achieve their best possible nest egg."

Although its fate is uncertain, the rider is potent. The language in section 114 of the House bill states that the fiduciary rule "shall have no force or effect."

Provisions of the rule that increase the number of financial advisers who are fiduciaries and set impartial conduct standards for them became applicable in June. The DOL has proposed delaying until July 1, 2019, the enforcement mechanisms of the rule, while it reviews the measure under a directive from Mr. Trump that could lead to changes.

But the legislative rider could take down the whole thing.

"It really does annihilate the rule in its entirety," Mr. Hall said. "The delay relates only to a portion of the rule, albeit an extremely important part of the rule."

While the rider makes its way through Congress, other bills to stop the DOL rule haven't yet received floor votes and face daunting prospects.

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