Appropriations bills that call for stopping the Obama administration from creating a new fiduciary standard are moving forward in the House and Senate, but stopping the rulemaking process faces high hurdles.
The House Appropriations Committee was working this afternoon on legislation to the full House that would “defund” the Department of Labor’s effort to craft a new fiduciary standard. It is expected to be passed and sent to the House floor later today.
And, a Senate appropriations subcommittee did the same thing Tuesday. The full Senate Appropriations Committee will vote on whether to send its version of the DOL funding bill to the full Senate on Thursday.
The proposals are aimed at “restraining regulatory overreach by the administration,” as stated by the Senate appropriations subcommittee that deals with the DOL budget.
The National Association of Insurance and Financial Advisers (NAIFA) said it supported the legislative initiatives.
“The rule as currently proposed is unworkable for advisors and their clients,” said NAIFA President Juli McNeely. “NAIFA continues to work with DOL officials to make revisions to ensure the rule does not harm middle-market investors and put undue restrictions or burdens on advisors. We are also pursuing legislative options, including a bill requiring the Securities and Exchange Commission to go first, appropriations riders to de-fund the rule making, and our preferred choice of legislation that would put clients’ interests first without the burdens and confusion of the DOL rule.”
However, the Office of Management and Budget has sent a letter objecting to the current appropriations process in general, as well as specific objection to the DOL defunding provision.
The general opposition stems from the fact that the budgets being adopted by the Republican majorities in the House and Senate are based on a budget template document passed earlier this year that sustains so-called “sequestration” provisions that would roll back federal government spending across the board to levels not seen in 10 years.
As to the DOL fiduciary rule provision, the administration letter said that, “the bill blocks a regulation that would protect retirement savers by ensuring that investment advisors are free from conflicts that prevent them from acting in the best interest of their clients. This is a common sense rule that protects those saving for retirement from being steered into investments that are in their advisors' financial interest but not theirs.”
In a recent webinar, Stephen P. Wilkes of the Wagner Law firm, said, “I think it will be just a question of when, and how much change and tailoring will occur to it before it gets final.”
He said the DOL proposal creates a class system where “you will have two classes of advisers, some who will earn variable compensation [commission] because they have met these exemptions, and you will have another class of advisers who say they are advisers and are earning in a different way.”
In another comment, rule supporter Barbara Roper, director of investor protection for the Consumer Federation of America, said that it is disappointing that some members of Congress “are more concerned with protecting the bottom lines of financial firms than they are with protecting working Americans and retirees who face genuine financial struggles, made worse when they get costly retirement advice that doesn’t serve their best interests.
“While we take these threats very seriously, we do take comfort from the strong White House support for the rule and hope that will be enough to allow the DOL to finish the job it has started,” Roper said.
InsuranceNewsNet Washington Bureau Chief Arthur D. Postal has covered regulatory and legislative issues for more than 30 years. He can be reached at [email protected].
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