Senate Report Attacks DOL Fiduciary Rule
Sen. Ron Johnson (R-WI), chairman of the Senate Homeland Security and Governmental Affairs Committee, released a report from the committee on Wednesday criticizing the Department of Labor for “disregarding” concerns raised by the Securities and Exchange Commission, the Office of Information and Regulatory Affairs, and the Treasury Department in regards to the DOL’s proposed fiduciary rule.
The fiduciary rule could redefine what the Employee Retirement Income Security Act considers a fiduciary and impose new mandates and regulatory requirements on financial advisors.
Critics of the rule believe that it will be overly burdensome and costly, and will ultimately reduce the access provided to lower and middle income investors seeking retirement advice.
The report, The Labor Department’s Fiduciary Rule: How a Flawed Process Could Hurt Retirement Savers, notes that Chairman Johnson requested information and documents from the various federal agencies “to ensure that the [DOL] solicited and fully considered advice from career, non-partisan professionals with expertise in the proposal’s subject matter.”
He found that “officials at the Labor Department disregarded many of these concerns and declined to implement recommendations from the SEC, OIRA, and the Treasury Department.”
The SEC received the full proposed rulemaking package from the Labor Department in November 2014 and exchanged edits and comments with the Labor Department in January 2015, identifying at least 26 items of concern related to the substantive content of the proposed rule.
These concerns included “issues of clarity in the rule’s ‘best interest’ standard, inadvertent consequences of a de minimis breach, conflicts with federal securities laws and FINRA rules, and a lack of cost-benefit analysis of alternatives.”
The report indicated that “The Labor Department repeatedly provided an incomplete response, declined to accept the SEC staff’s recommendations, or incorrectly implemented the SEC expert’s recommendations.”
In addition, the report indicates that the Labor Department and the SEC were at odds about the rulemaking, with one SEC staffer stating, “I am now also utterly confused as to what the purpose of the proposed DOL rule is…”
Johnson stated that, “The Department’s proposal appears to be a solution in search of a problem, driven by ideology rather than a market need.”
Former SEC Commissioner Daniel Gallagher also criticized the rulemaking process, calling it a “fait accompli” and stated that the comment process was “merely perfunctory.” He noted that the “fiduciary proposal does not contemplate or even mention potential SEC rules or the SEC’s existing regime for regulating broker-dealers and investment advisers.”
Earlier this week, House Speaker Paul Ryan expressed his disdain for the proposed rule on his official blog, stating “We are determined to do everything possible to protect consumers and stop this rule. We are also working on ideas to rein in our regulatory state for the bold, pro-growth agenda we will present to the country in the coming months.”
