Killing the clock on fiduciary proposal

The financial industry apparently is a big believer in strength in numbers. Last month, more than a dozen industry groups (16 to be exact) signed a letter to Labor Secretary Thomas Perez seeking a 45-day extension of the 75-day public comment period for the agency’s recently released proposal that would raise investment-advice standards for advisers to retirement accounts.

The DOL released the rule April 20 and the group, led by the Financial Services Roundtable, sent its letter April 21. It’s noteworthy that the industry took just one day to fire off its initial response to the fiduciary rule proposal, but claims it needs at least 120 days to file a comprehensive response.

Pressure appears to be coming from the Senate as well. On April 21, several Democratic senators, toeing the industry line, met with Mr. Perez to push the extension issue.

Not to downplay the complexity of the rule — because it is indeed complex — but the issue is not a new one and while the proposal was a rewrite of the original 2010 effort, the industry grapples with fiduciary issues all the time.

So it’s hard to imagine that the financial industry can’t get its lawyers to come up with some response in the allotted time. There is no doubt that industry players knew some of what was coming and have some points of view already. From a technical perspective, that 75 days works out to about 300 working hours. That’s a lot of time.

What’s more, Davis & Harman, a law firm that represents many financial firms, was able to craft a quick response, which basically claimed the new proposal was no better than the 2010 version that the Labor Department pulled after stiff resistance from these same financial firms.

NOT A DONE DEAL

And even after the 75 days, it’s not a done deal. When the comment period concludes, the DOL will hold a public hearing within 30 days, publish the transcript from that hearing and then take more comments on the proposal.

So the knee-jerk reaction seeking more time smacks of foot-dragging, possibly in the hope that the proposal could be delayed until a new administration takes over, something that does not serve investors well.

It would appear that Barbara Roper, director of investor protection at the Consumer Federation of America, got it right when she told InvestmentNews reporter Mark Schoeff Jr.: “The industry knows their best chance of killing this rule is to delay it until the clock runs out.”