Labor Secretary Thomas Perez addressed a meeting of House Democrats on Wednesday to update them on progress of a pending rule that would raise investment advice standards for retirement accounts. But he hasn't yet won over some Democratic lawmakers who are wary of the measure, which could be released in final form as early as next month.
The controversial rule, which would require financial advisers to 401(k) and individual retirement accounts to act in the best interests of their clients, has generated almost unanimous opposition from Republicans. Nearly 100 House Democrats also expressed misgivings about parts of the regulation in a letter to the DOL last year.
Two of the Democrats who are skeptical about the rule and support bills that would halt it — Reps. Richard Neal of Massachusetts and John Larson of Connecticut — were not assuaged by Mr. Perez's presentation on Capitol Hill. They said Mr. Perez didn't provide details about the regulation because it hasn't been publicly released.
“It's hard to say whether you're for or against it if you don't know what's in it,” Mr. Neal told reporters after the meeting. “It's like trying to put your hands around Jell-O. It was good back-and-forth and good give-and-take.”
Mr. Larson also remains leery of the rule because he fears it will raise the cost of investment advice and price low- and middle-income savers out of the advice market.
“We still have concerns because we don't know what's in it,” he said.
Nine Democrats sent a letter to the Labor Department earlier this month reiterating their warnings about the rule, according to a story in The Hill newspaper.
But other Democrats liked what they heard from Mr. Perez on Wednesday.
“He addressed my concerns,” Rep. Carolyn Maloney, D-N.Y., the second-ranking Democrat on the House Financial Services Committee, told reporters.
For the most part, Democrats are likely to stick with the administration — which thinks the rule is necessary to curb conflicts of interest that lead brokers to recommend high-fee investments that erode retirement savings — while financial firms say it is too complex and costly.
“It's pretty fair to say that most Democrats want to head in the direction that the secretary said,” Rep. Xavier Becerra, D-Calif., caucus chairman, told reporters after the meeting. “Most of those who want to do well and also do good within the industry want to make sure that the best interests of that small investor, of that senior, is taken into account first. My sense is that the secretary found a lot of agreement with what he was saying generally.”
On the other side of the Capitol on Wednesday, the Senate Homeland Security and Governmental Affairs Committee released a report that asserts the DOL disregarded concerns about the rule from staff of the Securities and Exchange Commission and other government agencies.
“The majority staff found that the Labor Department frequently prioritized the expeditious completion of the rulemaking process at the expense of thoughtful deliberation,” the report states. “Additionally … political appointees at the White House played a key role in driving the rulemaking process at the inception of the redrafting effort.”
The DOL said it listened to SEC input as it shaped the rule.
“We coordinated closely with staff from the Securities and Exchange Commission during the entire four-year period of developing the proposed rule,” DOL spokesman Mike Trupo said in a statement. “The documents that Congress has reviewed — and the committee's report mischaracterizes — make clear that our engagement with the SEC was comprehensive, and that the SEC's input was incorporated and strengthened our proposal.”
The meeting with the House Democrats comes as the rule is being reviewed by the Office of Management and Budget. Mr. Perez appeared along with Jeffrey Zients, director of the National Economic Council.
The Obama administration wants to complete and implement the rule before it leaves office in January. It could come out in final form in March, according to a financial industry official.
The meeting with Democrats on Capitol Hill to discuss the fiduciary rule signifies it is on a fast track, according to Barbara Novick, vice chairman at BlackRock and head of government relations and public policy at the firm.
“We're hearing it's imminent that the rule will come out,” Ms. Novick said. “The betting pool a few weeks ago was end of March, beginning of April. I would put the betting pool today on the first 10 days of March.”
These meetings with the Democrats typically wouldn't occur very far in advance of a final fiduciary rule release due to fear of a leak of details, which is why a two-to-three-week timeline is likely, Ms. Novick said.
Greg Iacurci contributed to this story.