Acosta says Labor Department will revive fiduciary rule

DOL secretary says his agency is collaborating with the Securities and Exchange Commission as the regulator finalizes its own Reg BI

May 1, 2019 @ 4:44 pm

By Mark Schoeff Jr.

Labor Secretary Alexander Acosta told lawmakers Wednesday the agency would revive its fiduciary rule.

In a hearing of the House Education and Labor Committee, Mr. Acosta said DOL is working with the Securities and Exchange Commission as the SEC completes its investment advice reform package.

The SEC took the lead on the issue of raising advice standards when the DOL rule was killed in a federal appeals court last year. The new DOL rule likely would be contoured to the SEC's final regulations, which are expected to come out this summer.

"We are communicating with them, and based on our collaboration, we will be issuing new rules in this area," Mr. Acosta said in an exchange with Rep. Marcia Fudge, D-Ohio.

In a tense Q&A, Ms. Fudge pressed Mr. Acosta on when the new DOL rules would come out, but he declined to give a time line. Mr. Acosta's statement reflected the DOL regulatory agenda, which includes an item on addressing "regulatory options" in the wake of the demise of the previous fiduciary rule.

The defunct DOL rule would have required brokers to act in the best interests of their clients in retirement accounts. Most of the financial industry opposed the DOL measure, saying it would foist costly new regulatory burdens and legal risk on brokers.

Opponents of the DOL rule have been supportive of the SEC's proposed package, the centerpiece of which is Regulation Best Interest. The SEC says that provision will raise the broker standard above the current suitability rule.

Mr. Acosta's statement is good news for the industry, according to Jaret Seiberg, an analyst at Cowen Washington Research Group.

"We see this as a positive for financial advisers and active [investment] management as the Labor standard is unlikely to include class-action liability," Mr. Seiberg wrote in an analysis. "And it will make it more complicated to adopt a class-action-liability-focused rule if a Democrat wins [the presidency] in 2020."

Investor advocates assert the DOL rule had the teeth to mitigate broker conflicts of interest, something they say is lacking in the SEC proposal.

The challenge for the DOL is to prove that the SEC rule would provide sufficient protection for investors in retirement plans, said Barbara Roper, director of investor protection at the Consumer Federation of America. Federal retirement law requires that conflicts of interest be eliminated.

"I don't know where they would find the data to support that finding," Ms. Roper said. "The SEC certainly hasn't done the economic analysis to support that finding, and DOL's previous analysis reached the exact opposite conclusion."

0
Comments

What do you think?

View comments

Most watched

INTV

Young professionals see lots of opportunity to reinvent the advice experience

Members of the 2019 InvestmentNews class of 40 Under 40 have strategies to overcome the challenges of being young in a mature industry.

INTV

Young advisers envision a radically different business in five years

Fintech and sustainable investing are two factors being watched closely by some of the 2019 class of InvestmentNews' 40 Under 40.

Latest news & opinion

New Jersey fiduciary rule: Pressure leads to public hearing, comment deadline extension

Industry push results in chance to air grievances on July 17 and another month to present objections.

InvestmentNews' 2019 class of 40 Under 40

Our 40 Under 40 project, now in its sixth year, highlights young talent in the financial advice industry. These individuals illustrate the tremendous potential of those coming up in the profession. These stories will surprise, entertain, educate and inspire.

Galvin to propose fiduciary rule for Massachusetts brokers

The secretary of the commonwealth is proposing a fiduciary standard in response to an SEC investment-advice rule he views as too weak.

Summer reading recommendations from financial advisers

Here are some books that will keep you informed and entertained during summer's downtime

4 strategies for Roth conversions

There's never been a better time to do a Roth conversion, and here are several ways to go about it.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print