Tom Perez trying to push controversial proposal over the finish line but it's taking some time.
Financial services pros who have been waiting more than three years for the Labor Department to re-propose a rule that would raise investment advice standards for advisers to retirement plans will have to wait a little longer, thanks to a new player on the field, Labor Secretary Tom Perez.
Sworn into office in July, Mr. Perez promised senators during confirmation hearings that he would take bipartisan qualms about the regulation into account before the agency proceeded. That approach contributed to the agency scheduling a re-proposal for next August rather than a date in the spring, according to a former Labor official.
“The delay until August was surprising,” said Bradford Campbell, counsel at Drinker Biddle & Reath and Labor assistant secretary for the Employee Benefits Security Administration from 2006-09. “The latest delay appears to be related to Secretary Perez. There's clearly internal debate and clearance issues regarding this rule.”
Many observers said that Mr. Perez has been meeting with Democratic senators over the past month to assuage fears that they expressed about the potential rule in an August letter to Mr. Perez.
Lawmakers on both sides of the aisle — along with industry representatives — have warned that the DOL rule, which would expand the definition of “fiduciary” for anyone providing advice to retirement plans, would subject brokers selling individual retirement accounts to fiduciary duty for the first time. They argue that it would increase their regulatory costs and potentially drive them out of the market for investors with modest retirement assets.
“My understanding is that he's digging into the issues, and he's looking for a solution that would address the department's concerns and the legitimate concerns about cutting off small accounts from advice,” said Kent Mason, a partner at Davis & Harman.
A DOL spokesman said that Mr. Perez, Labor Assistant Secretary Phyllis Borzi, who has championed the proposal, and other officials are talking to lawmakers.
“It will be clear, when the re-proposal is published, that the department has been listening and taking seriously the comments it has received,” DOL spokesman Jason Surbey said in a statement.
In October, the House of Representatives passed a bill written by Rep. Ann Wagner, R-Mo., that would force the DOL to delay its fiduciary regulation until the Securities and Exchange Commission acted on its own fiduciary-duty rule for retail investment advice. Critics said that the bill would effectively kill the DOL rule because the SEC might decide not to proceed. The Obama administration issued a veto threat.
“At this point, I don't see any Democratic interest in taking up the Wagner bill on the Senate side,” Mr. Mason said. “They want to work with the administration to achieve consensus, as opposed to doing it through legislation.”
Mr. Perez's effort to work the halls of Congress is adding new momentum to the DOL rule, according to Mary Wallace, a senior legislative representative at AARP.
“Mr. Perez is very engaged on this issue,” Ms. Wallace said at a Consumer Federation of America conference this month in Washington. “He's been doing a lot of push-back on the hill. The new energy we're seeing there is very encouraging. I do believe we'll get both rules, and the DOL will go first. ”
But Andrew Oringer, a partner at Dechert, said that the long delays on the DOL rule, which was originally proposed in 2010 and then withdrawn after fierce industry opposition, do not bode well for its ultimate promulgation.
“It is growing increasingly uncertain that we will ever to get finalization, and it's even increasingly uncertain that we'll get to re-proposal,” Mr. Oringer said.
Part of the problem, he said, is that the Obama administration has experienced a big setback in implementing the health care reform law and may be reluctant to roll out other regulations that could have unintended consequences.
“You have to wonder whether they want to go down a complex regulatory road again,” Mr. Oringer said.
