For the moment, regulatory activity in the Obama administration is dormant. But it is likely to pick up rapidly if President Barack Obama is re-elected in November, an official in the George W. Bush administration said Tuesday.
For the past six months, no regulations have been sent by the Labor Department's Employee Benefits Security Administration, including one that would overhaul fiduciary duty rules for retirement plans, to the White House, according to Bradford Campbell, counsel at Drinker Biddle & Reath LLP, who served as assistant labor secretary in charge of the EBSA from 2007 to 2009.
“That's a pretty unusual dry spell,” Mr. Campbell said at the Insured Retirement Institute regulatory conference.
“I can't recall a time when the pipeline has been completely empty for six months,” he said later in an interview.
It also means that a rule that would significantly expand the definition of “fiduciary” for anyone providing investment advice on retirement plans is unlikely to surface until after the election. The rule, which was withdrawn in September 2011 amid fierce industry opposition, still must be re-proposed and approved by the Labor Department. Once it is sent to the White House, it will take up to three months for it to be vetted by the Office of Management and Budget.
Despite the slowdown, opponents of the rule, which argued that was too expansive, shouldn't breathe a sigh of relief, according to Mr. Campbell.
If Mr. Obama is re-elected, the DOL rule is likely to have a strong second wind at its back.
“Will we see much more aggressive regulation when there's not an election on the horizon? I fear we will,” Mr. Campbell said in the interview.
After a victory by Mr. Obama in November, “we're likely to see a renewed push for some fairly aggressive financial regulation,” Mr. Campbell said.
In an appearance before an industry group and in a letter to Congress last week, Mr. Campbell's successor as head of the employee benefits agency, Phyllis Borzi, said that the Labor Department is working on a new fiduciary duty proposal, but she declined to say when it would be released.
Ms. Borzi said that the definition of “fiduciary” under retirement laws must be updated to better protect investors from conflicted advice as millions are trying to build a nest egg through individual retirement accounts and 401(k) plans.
Industry opponents and members of both parties of Congress adamantly counter that the original DOL proposal would subject IRAs to fiduciary duty for the first time, potentially driving brokers out of the market and leaving workers and retirees nowhere to turn for investment advice on the products.
The re-proposed rule will still incorporate IRAs, according to Ms. Borzi.
In order to address another concern of opponents— that the original lacked a sufficient regulatory-impact assessment — she said that the department is conducting a rigorous cost-benefit analysis.
“While the department was disappointed not to receive many of the suggested data elements from industry sources, we have met with industry representatives and asked them to provide whatever information they had that would be useful to our efforts,” Ms. Borzi wrote in a June 20 letter to the leaders of the House Education and Workforce Committee. “We will incorporate all of this information and feedback into our updated economic analysis of our updated proposal.”
Like many other critics, Mr. Campbell said that the original fiduciary proposal would have prevented brokers from earning compensation from IRA transactions.
Ms. Borzi and fiduciary proponents have said that brokers would still be allowed to charge commissions.
Mr. Campbell hopes that a clarified sales exemption will sort out this area.
“The way it was written [in the original proposal] was very ambiguous,” he said. “How it is articulated in the new proposal might address some of these concerns.”