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Both opponents and a lone supporter of the Labor Department’s fiduciary rule stuck to their expected arguments at a House Financial Services subcommittee hearing on the rule and draft legislation to gut it.
The discussion at the House Capital Markets, Securities, and Investment subcommittee meeting reflected the fissure that still remains about the Obama-era regulation. Republicans and many financial service industry representatives say the rule on financial adviser conflicts-of-interest actually hamstrings advisers and will result in fewer choices for savers. Democrats and supporters of the rule, including some industry groups, say it protects savers by giving them access to unbiased advice.
Representatives from the Financial Services Institute, American Council of Life Insurers, and Securities Industry and Financial Markets Association said they support at the very least delaying the Jan. 1, 2018, applicability date for parts of the regulatory package that haven’t gone into effect, including the best-interest-contract exemption. The groups have pushed back hard against the rule.
They also expressed support at the hearing for draft legislation from Rep. Ann Wagner (R-Mo.) that would have the Securities and Exchange Commission take the lead on crafting a fiduciary regulation. The measure would repeal the rule and create standards of conduct for brokers and dealers that are in the best interests of their retail clients and comes with required disclosures from broker-dealers.
The lone panel member in favor of the DOL’s rule—Cristina B. Martin Firvida of AARP—called parts of Wagner’s draft legislation “quite vague,” particularly when it comes to establishing a best interest standard. And there’s room for the DOL and the SEC to work together on the issue, she said.
This isn’t the first time Wagner tried to block the fiduciary rule. The House passed Wagner’s Retail Investor Protection Act ( H.R. 1090), which sought to stop the DOL from finalizing the fiduciary rule, but it failed to advance in the Senate.
Many subcommittee members, including Chairman Bill Huizenga (R-Mich.), voiced their support of the legislation. Rep. David Scott (D-Ga.) wasn’t as happy with the discussion draft, saying it “undermines” the SEC’s rulemaking authority by being overly prescriptive. He called the bill a “straight jacket” on the SEC and pushed for the bill to be amended to direct the SEC to “do its job.” Scott also said there should be a harmonization between the DOL and the SEC on this front.
The fiduciary rule is currently undergoing a presidentially mandated review by the DOL. The agency June 29 asked for public feedback in several areas, including “compliance mechanisms” and what industry innovations might allow for new streamlined exemptions that would let advisers provide advice without running afoul of the law.
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