The fight to stop the Department of Labor's fiduciary proposal is far from over, opponents vowed this morning.
The primary focus of the fiduciary fight was lost Tuesday night when Congress declined to insert a rider in the forthcoming budget bill to derail the Department of Labor’s controversial fiduciary rule.
However, a 2010 industry coalition defeated the Rule 151A after it became law, said Kim O’Brien, CEO of the nonprofit group Americans for Annuity Protection, during a webinar Tuesday co-sponsored by InsuranceNewsNet.
That fight pitted the industry against the Securities and Exchange Commission, which published Rule 151A regulating fixed index annuities. After much lobbying, Sen. Tom Harkin, D-Iowa, introduced an amendment blocking the SEC from regulating FIAs. That forced the SEC to shelve Rule 151A.
“We are not giving up,” O’Brien said of the fiduciary fight.
Opponents in the financial services industry hope to kill the fiduciary proposal by any means possible. A rider was seen as a strong possibility, but lawmakers deemed issues such as tax cuts, Planned Parenthood and Syrian refugees higher priorities.
“We were hoping Congress would intercede and it’s looking like they probably won’t,” Richard Weber, past president of the Society of Financial Professionals, said Tuesday. “It is coming. So let’s understand the issues … and let’s see where that takes us.”
Congressional action to torpedo the DOL proposal was always a longshot, said Dale Brown, president and CEO of the Financial Services Institute.
"That rider is not Congress’ only chance to act," he added in a statement. "This is why all advisors must get engaged in the legislative process and advocate for hard-working Americans trying to save for a dignified retirement.”
Calling it "the paramount domestic policy issue of our day," Cathy Weatherford, president and CEO of the Insured Retirement Institute, agreed that Congress cannot drop the fiduciary issue.
"We are at a critical juncture in the rulemaking process where these concerns need to lead to an appropriate response that addresses these issues," Weatherford said.
In April, the DOL proposed new fiduciary rules, including six proposed prohibited transaction exemptions, governing advice provided regarding qualified retirement employer-sponsored plans and individual retirement accounts.
DOL officials and public interest groups say the proposed rules, which would impose a fiduciary standard of care on financial advisors dealing with retirement accounts, are necessary to protect retirement investors from high commissions.
The DOL is expected to publish the rule in the spring, in the hopes it will be adopted before President Barack Obama leaves office in January 2017.
Barring any changes, there are two possible avenues where litigation could prove successful in stopping the DOL rule, said Washington D.C. lawyer James Jorden.
“One is that it exceeds statutory authority with respect to the definition,” said Jorden, a shareholder of Carlton Fields Jorden Burt. “And two, its failure to comply with APA (Administrative Procedure Act) requirements such as the cost benefit analysis.”
In a webinar hosted by Drinker Biddle & Reath last week, analyst Fred Reish said he expects the Department of Labor to be very meticulous in crafting a rule that will stand up in court.
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected].
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