One of the leading congressional opponents of a Labor Department proposal to raise investment-advice standards for retirement accounts hopes a House hearing Thursday will build momentum to stop the rule.
Two subcommittees of the House Financial Services Committee will hold a joint hearing that will focus in part on a bill written by Rep. Ann Wagner, R-Mo., that would require the DOL to suspend its rulemaking until the Securities and Exchange Commission first proposes its own rule for retail investment advice.
The SEC is nowhere near making its own move, while DOL
is poised to issue a final rule early next year. Ms. Wagner wants to stop DOL in its tracks.
She is incensed that Labor Secretary Thomas Perez indicated in an Aug. 7 letter to her that the agency would move ahead with a final rule rather than re-propose the measure.
“It is hard to imagine the DOL producing a workable rule based off of this proposal,” Ms. Wagner told reporters Wednesday. “As a result, this hearing will start to unravel the real-world impact of this rule based on how it is currently proposed.”
Critics say the rule, which would require advisers to 401(k)s or IRAs to act in clients' best interests, would significantly increase liability risks and regulatory costs for brokers and make giving and receiving advice much more expensive. The White House backs the rule, which is designed to reduce conflicts of interest that give advisers incentives to put clients in high-fee products.
During the hearing, Ms. Wagner will try to convince more lawmakers to co-sponsor her bill, the Retail Investor Protection Act.
“This is good legislation that prevents an overzealous administration from taking away sound advice from low- and middle-income savers,” Ms. Wagner said. “A lot of our Democratic colleagues and Republican colleagues got the message when they were back at home [during the congressional summer recess]. I hope we can pick up more support from the hearing tomorrow and in coming months.”
The full House Financial Services Committee may vote on the bill later this month. Ms. Wagner wants to move the bill as a stand-alone measure. But she's also considering inserting it into appropriations legislation Congress will have to take up to keep the government funded after the current fiscal year ends Sept. 30.
“I do believe that there are ways through perhaps the appropriations process that this could ultimately be dealt with, if necessary,” Ms. Wagner said.
The hearing, before a Republican-majority subcommittee, will be heavily weighted toward industry critics. Scott Stolz, a senior vice president at Raymond James & Associates Inc., will be among the witnesses.
In his letter to Ms. Wagner, Mr. Perez said the DOL has been listening to its critics and included provisions in the rule that allow for a variety of compensation methods for financial advisers.
“The new proposal was designed to allow for the flexibility the financial services industry requested,” Mr. Perez wrote. “This will ensure that your constituents are protected in a way that isn't unnecessarily disruptive for those who provide investment advice to retirement savers.”
The DOL this week
posted the transcript from four days of hearings on the rule it held in August. It also opened another comment period on the rule that will last until Sept. 24. The agency has collected more than 2,600 comment letters so far.
For the moment, DOL is pushing ahead, Ms. Wagner is resisting and President Barack Obama is ready to veto a stand-alone bill.
“The DOL dug in on this,” Ms. Wagner said. “But I'm pretty dug in, too. We're going to fight this through the legislative process. If the president vetoes it, then we'll get other options at that time.”
