At IRI Legislative Conference ‘It’s a Wrap’ Around Regulation

One of the burning questions among attendees at this year’s Insured Retirement Institute’s Government, Legal & Regulatory Conference wrapping up today was how heavy the proverbial elephant in the room actually weighed.

Ever since Sunday, estimating the size of this year’s regulatory beast — the U.S. Department of Labor’s proposed fiduciary rule — had devolved into a spectator sport.

Did the mastodon weigh 600 pounds, or 800 pounds? Did it weigh in at 6,000 pounds or 8,000 pounds? Or were we talking on the order of 60,000 pounds or 80,000 pounds?

It is the multibillion-dollar question.

On at least three separate sessions, legislative experts used the expression to describe the wide-ranging regulatory initiative, a tome consisting of about 1,000 pages.

Surely that qualifies as an elephant.

Legal experts were taking the DOL rule seriously, venturing that Labor Department regulators would not back down — even if Judith Mares, deputy assistant secretary within the department’s Employee Benefits Security Administration, did allow there was room for discussion in the name of securing adequate retirement for all Americans.

She said regulators and industry are committed to a safe and secure retirement even if “at times we suffer from not having all of us in the room at the same time.”

With the U.S. Supreme Court ruling in favor of the Affordable Care Act last week, regulators seemed to have gained a little more clout this week as lawmakers prepared to leave town for the Independence Day weekend.

Steve Saxon, chairman of the Groom Law Group and an opponent of the proposed fiduciary rule, called it “a really big deal,” urging trade groups to get involved.

Financial advisor groups were doing precisely that, furiously working to narrow the scope of the rule or quash it completely.

Will advisors prevail over DOL regulators? They’ve won a couple of skirmishes. The comment period was extended by two weeks ending July 21, stretching the initial comment period to more than 90 days, and Congress introduced bills in June to withhold funds for DOL.

The next several weeks will shed light on where parties stand.

Written comments will be followed by a public hearing August 10-12 and, if necessary, on the 13. By the time the DOL closes its public hearing, the opportunity to collect testimony and comments will have stretched more than 140 days, the DOL estimates.

Usually, public hearings are one- or two-day affairs at most and this one may go on for twice as long.

The volume of letters coming into the DOL is already reached a crescendo.

A cursory check of the DOL’s website June 30 reveals that 36 letters on the rule’s prohibited transaction exemption have been filed, and another 100 comment letters from individual advisors and a smattering of trade groups, in favor of and against the rule.

A former DOL official who spoke of the proposed rule sucking resources away from other DOL initiatives hinted that the final rule would be available next summer.

If there was an overriding theme to this year’s conference it was regulation — no surprise given the subject of a regulatory conference.

Among the regulatory updates surrounding details of variable annuities, contingent deferred annuities, qualified longevity annuity contracts, starter individual retirement accounts and target date funds, one comment stuck out more than the others, encapsulating what the insurance distribution chain faces in the future.

The comment came from Tom Vartanian, a former banking industry regulator and now a partner with the law firm of Dechert LLC, as he appeared to reflect on what to him seemed to be an immutable law etched in time.

“I have never seen fewer regulators or regulations than the year before,” he said Tuesday in a session on the applicability of bank-centric rules to insurance companies.

However ominous-sounding a message, regulators deserve a fair shake. With more people, longer retirements and new products continually entering the marketplace, more regulation would seem to flow naturally from them.

Regulators, don’t forget, are paid to protect investors.

While the 2008 financial crisis taught free-market economies that no one benefits when markets run amok, you couldn’t help but marvel at the regulatory blanket suffocating financial services providers — and evening feel sympathetic to their cause.

When Vartanian threw up a slide put together earlier this year by outgoing SEC Commissioner Daniel M. Gallagher of all the rules applicable to U.S. financial services holding companies, some attendees looked on in disbelief.

In fact, the adjective “elephantine” might not even begin to describe it.

Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].