The Consumer Federation of America is fighting back on a bill aimed at delaying the Department of Labor’s fiduciary rulemaking, calling it “ill-conceived and dangerous legislation.”
In a letter sent Monday from Financial Services Counsel Micah Hauptman and Director of Investor Protection Barbara Roper, the CFA denounced the Retail Investor Protection Act, reintroduced last Wednesday by Representative Ann Wagner (R-Mo.), as “cynically misnamed.” The group claims the bill not only aims to halt the DOL’s proposed rule, but it also curbs the Securities and Exchange Commission’s ability to move forward on any potential fiduciary rulemaking.
Wagner’s bill H.R. 1090 would require the DOL to wait 60 days after the SEC publishes a rule regarding brokers’ fiduciary duty before releasing its own. Additionally, the proposed legislation calls for the SEC to conduct analysis to determine if investors would be “systematically harmed or disadvantaged” by the rulemaking.
“This bill is a clear attempt to thwart DOL action by making the DOL wait indefinitely to proceed with its rulemaking to strengthen protections under ERISA until after the SEC finalizes a rule under securities laws,” the letter says, adding the bill forces the SEC to perform further economic analysis and make formal findings before promulgating a rule. “This approach puts both agencies in a vice, effectively crippling both their abilities to fulfill their unique and critical regulatory roles. Moreover, with no justification, it also subjugates an executive agency’s jurisdictional authority to an independent agency’s.”
Following a speech by President Barack Obama in support of the fiduciary proposal, the DOL submitted its rulemaking to the Office of Budget Management for at least a 90-day review on Feb. 23. The proposed rule would require advisors overseeing retirement plans to act under a fiduciary standard, putting client interests ahead of all other considerations when making investment recommendations on accounts covered under the Employee Retirement Income Security Act.
Sen. Elizabeth Warren (D-Mass.), Sen. Cory Booker (D-N.J.), and Sen. Edward J. Markey (D-Mass.) stood by President Obama, praising the prospect of new rules. “It's about time to do something we should have done long ago—to end the kickbacks, the free vacations, the fancy cars and the other incentives to sell bad products to unsuspecting customers," Warren said at an AARP event.
But in proposing her bill, Wagner said she believes President Obama and the DOL “presented a solution in search of a problem,” adding the rulemaking could harm thousands of low- and middle-income Americans’ ability to save and invest for their future. The bill was assigned to a congressional committee on Feb. 25, which will consider it before possibly sending it on to the House or Senate as a whole. However, GovTrack.com estimates the legislation has a zero percent chance of being enacted.