Amendment would require Labor Department to work with SEC on revised standard
Republicans and Democrats in Congress may have a hard time working together but they're pushing the Securities and Exchange Commission and Labor Department to do just that.
Next week, a congressional panel will consider legislation that would, among other things, require the SEC and DOL to coordinate their separate efforts on a fiduciary-duty regulation.
“It's a message bill as opposed to a policy bill, and the message is to tell the DOL to slow down and be cautious,” said one industry lobbyist, who asked not to be named because the bill still is being drafted.
The House bill would require the SEC to coordinate its fiduciary-duty work with other federal agencies before proposing a rule, according to two financial industry lobbyists. This provision could have the effect of slowing the DOL's fiduciary work to the SEC's pace.
The DOL has indicated that it will re-propose its fiduciary-duty rule in July, although observers expect it to be delayed into the fall. The SEC is conducting a cost-benefit analysis on a fiduciary-duty rule and has not yet proposed a measure.
On May 23, the House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises is scheduled to take up a proposal that would amend the fiduciary-duty provision in Dodd-Frank.
A committee aide said that the legislation still is being written and would likely be brought forward by the majority Republicans as a discussion draft rather than a formal bill.
Dodd-Frank gives the SEC the authority to promulgate a regulation that would require brokers to act in the best interests of their clients — the same standard that investment advisers currently meet.
Another lobbyist said that DOL and the SEC have to do more than go through the motions of working together.
“A coordinated and consistent result — one that adequately protects consumers while maintaining needed access to advice — is what's important, not simply a coordinated process,” said Dan Barry, president of Atlantic Policy Solutions LLC. “No matter what the degree of coordination, if the rules aren't consistent in areas where there is overlap, there are going to be problems.”
The DOL first issued its proposal — which would expand the definition of “fiduciary” as it applies to providers of investment advice to retirement plans — in 2010. It was withdrawn after fierce financial industry protest that it would for the first time subject brokers selling individual retirement accounts to the more stringent fiduciary requirements.
Opponents of the DOL fiduciary rule have warned that the rule and the SEC fiduciary rule for investment advice could overlap, causing compliance difficulties for brokers.
A second provision in the House proposal, according to sources familiar with the bill, would require the SEC to determine whether a uniform fiduciary duty would clear up investor confusion about the different standards that govern advisers and brokers.
Another provision would require the SEC to show that current advice rules harm investors and that a uniform standard would provide a remedy.
The SEC already is collecting data for a cost-benefit analysis that might provide the answers that the House committee is seeking.
Although it's too early to tell how much support the House proposal might generate, dozens of lawmakers have expressed concerns about the DOL fiduciary-duty rule.
The DOL and SEC have said that they operate under different laws — federal retirement statutes for DOL and securities laws for the SEC — and will issue separate fiduciary-duty proposals. But they also have indicated that they are working together.
