Trump taps top lawyer against DOL fiduciary rule to head the department

Investor advocates wonder whether Eugene Scalia personally holds positions he advocated in court, while financial industry groups welcome the nomination

Jul 19, 2019 @ 12:47 pm

By Mark Schoeff Jr.

President Donald J. Trump intends to put at the head of the Labor Department the man who was instrumental in killing the agency's fiduciary rule for financial advice in retirement accounts.

In a tweet Thursday, Mr. Trump said he will nominate Eugene Scalia for Labor secretary to replace Alexander Acosta, who announced his resignation last week.

Mr. Scalia, partner at Gibson Dunn & Crutcher, was the counsel for the financial industry's lawsuit that resulted in a federal appeals court striking down the DOL rule last year.

The Labor Department's regulatory agenda says it will propose a revised fiduciary rule by the end of the year. Mr. Acosta indicated to Congress earlier this year that the next iteration of the rule would be fashioned around Regulation Best Interest — a measure in the Securities and Exchange Commission's recently approved advice reform package designed to raise broker standards.

For some investor advocates who said the original DOL rule was stronger than Reg BI, Mr. Scalia's appointment may be discouraging. But Barbara Roper, director of investor protection at the Consumer Federation of America, acknowledged there's a chance Mr. Scalia embraced the industry's opposition to the DOL fiduciary rule because they were his clients, and might not hold the same views as Labor chief.

But she's not hopeful.

"I'm skeptical, in light of the extreme positions he argued in his briefs, that he would be prepared to adopt a rule that protects workers from harmful conflicts of interest in their retirement investments," Ms. Roper said. "He has been the favorite attorney of the Chamber of Commerce and business monied interests in their efforts to fight regulations designed to protect workers and investors. His record speaks for itself."

Another fiduciary advocate was more optimistic.

"Mr. Scalia is a gifted lawyer. I trust that he will enforce the law that protects the retirees' source of income," Tamar Frankel, professor of law emerita at Boston University, said in a statement. "Having served brokers, he is well aware of their activities. He is no longer their lawyer. He is the American people's and their retirees' lawyer, and I am sure he will serve his new clients as effectively as he served his clients in the past."

Industry opponents of the DOL rule likely hired Mr. Scalia, son of the late Supreme Court Justice Antonin Scalia, for the lawsuit because of his history of successfully overturning securities regulations in court. They're looking forward to his leading the DOL.

"If he's confirmed, we're confident he'll be an outstanding secretary of Labor," Financial Services Institute chief executive Dale Brown said. "I'm confident that under a Secretary Scalia, the department will take an appropriate, measured approach [on revising the fiduciary rule], including close coordination with Reg BI."

Another industry trade group echoed the sentiment.

Mr. Scalia "is a fantastic pick to serve as the next Labor secretary," Christopher Iacovella, chief executive of the American Securities Association, said in a statement. "ASA looks forward to working with him to ensure the DOL harmonizes its rule with the SEC's Regulation Best Interest rule."

While Mr. Scalia goes through the Senate confirmation process, Patrick Pizzella, former deputy labor secretary, is serving as acting agency chief. Mr. Brown doesn't believe DOL leadership turnover will delay the promulgation of a new fiduciary rule.

"I don't think the change in the secretary of Labor slows that down a lot, because [DOL] career people in the building are working on the details," he said.

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