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White House Threatens Veto of Congressional Action to Block Fiduciary Rule

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As expected, President Obama will veto a resolution seeking to block the Department of Labor’s recently released fiduciary rule from taking effect, the Office of Management and Budget said in a statement yesterday. A House vote on the measure is taking place this Friday, although Senate approval is still required before it makes its way to the president.

The DI Wire reported last week that Rep. Phil Roe (R-TN), chairman of the House Education and the Workforce Subcommittee, introduced the resolution under the Congressional Review Act, which allows Congress to pass a resolution of disapproval to prevent a federal agency from implementing a rule without congressional authorization. The House Education and the Workforce Subcommittee approved the resolution 22-14 along party lines last week.

A resolution of disapproval only needs a simple majority to pass and cannot be filibustered or amended, if acted upon a 60-day window. It must also be signed by the President, or Congress can overturn a veto with a two-thirds vote in both the Senate and the House.

To coincide with Friday’s vote, a letter was sent to lawmakers signed by eight industry trade groups, including the Financial Services Roundtable, Financial Services Institute, the Securities Industry and Financial Markets Association and the U.S. Chamber of Commerce, expressing their concerns about the burdensome rule which they believe will negatively affect retirement savers.

“[Compliance] will be extremely complicated and expensive, resulting in increased consumer costs that will limit the services available to many modest-income investors,” the groups said.

Opponents to the rule say that financial advisers are currently not required to act in their clients’ best interest when giving retirement investment advice.

The Office of Management and Budget said that the “final rule reflects extensive feedback from industry, advocates, and members of Congress, and has been streamlined to reduce the compliance burden and ensure continued access to advice, while maintaining an enforceable best-interest standard that protects consumers.”

The fiduciary rule goes into effect in April 2017. The U.S. Chamber of Commerce has previously said that it will sue the federal government if the final rule proves unworkable.