By Timothy Keehan
The Department of Labor (DOL) intends to finalize its fiduciary re-proposal, possibly by year-end or in early 2016. (The re-proposal would greatly expand what is considered investment advice under ERISA and thereby enlarge the duties and liabilities of banks and other financial professionals providing such advice to retirement investors.) Recent statements and actions from anxious Hill Republicans and Democrats, however, suggest that the road to the proposed rule’s enactment will be anything but smooth. Republicans continue to conduct hearings in both the House and Senate to get the views of Labor Secretary Thomas Perez, consumer advocates and industry professionals. Republicans also have fired off numerous letters to DOL and most recently, have passed a House committee bill (H.R. 1090 – Retail Investor Protection Act) that would table the re-proposal until the SEC acts first on its own rule. For their part, Democrats likewise have sent letters to DOL expressing serious reservations about key provisions of the Re-Proposal, including a recent letter signed by 96 House Democrats.
The difference in reaction lies in both tone and solution. Republicans want to see the re-proposal’s withdrawal and the re-submission of a significantly reworked proposal for public review and comment. Democrats, on the other hand, appear content to see a finalized rule, provided that it satisfactorily responds to their concerns about lower- and middle-income retail retirement investors’ continued access to financial advice. A few House Republicans and Democrats, however, appear to have expressed some openness to sponsoring a bipartisan bill that would legislate a “best interest” advisory standard and therefore make the DOL re-proposal unnecessary. There are also appropriations riders in both the House and Senate that would bar funding for the re-proposal if finalized. In spite of President Obama’s unqualified support for the rule, Congress will likely continue taking an active hand in shaping its outcome.