DOL Issues Fiduciary Rule To Harmonize With SEC

The Department of Labor issued its new fiduciary rule one workday after a federal court upheld the Securities and Exchange Commission’s Regulation Best Interest standard, with which the DOL rule was designed to harmonize.

“The standards in the Department’s proposed exemption announced today align with standards of other regulators, including the SEC,” according to a DOL release. “Together, the actions of the SEC and the Department of Labor will strengthen retirement security for Americans.”

A group suing the SEC had claimed that the Regulation Best Interest, or Reg BI, rule did not safeguard consumers. A federal appeals court on Friday had decided that the rule was not arbitrary and capricious.

The DOL’s newest rule replaces an Obama-era rule that had been tossed by a federal court in 2018.

The latest rule allows “registered investment advisers, broker-dealers, banks, insurance companies, and their employees, agents, and representatives that are investment advice 2 fiduciaries” to be compensated by third parties for sales, including those involving roll-overs from an ERISA-qualified plan to an IRA.

“The proposal would allow investment advice fiduciaries to give more choices for retirement using Impartial Conduct Standards,” the DOL said. “Impartial Conduct Standards are a best interest standard; a reasonable compensation standard; and a requirement to make no materially misleading statements.”

Critics have said that Reg BI and the DOL’s expected rule did not protect consumers because the regulations did not require sellers to put their clients’ best interest first. Soon after Friday’s ruling on the SEC rule, the Consumer Federation of America castigated Reg BI and the expected DOL rule.

“Worse, with that legal hurdle cleared, the Department of Labor is expected to act quickly to extend this weak, industry-friendly standard to retirement accounts, depriving workers and retirees of vital protections against conflicted retirement investment advice,” according to a CFA statement.

American Council of Life Insurers CEO Susan Neely said the DOL’s new rule is “an important step for retirement savers.”

Neely said the rule requires clear and enforceable standards, especially when aligned with the SEC’s regulation. She also said the National Association of Insurance Commissioners has a best interest standard that further protects consumers.

“The states are moving on their own ‘best interest’ proposals,” Neely said. “Iowa and Arizona were first out of the gate, adopting the NAIC model. Even more are likely to act this year, helping spread increased safeguards for retirement savers seeking financial security in retirement.”

The public will have 30 days to comment on the rule.

Steven A. Morelli is editor-in-chief for InsuranceNewsNet. He has more than 25 years of experience as a reporter and editor for newspapers, magazines and insurance periodicals. He was also vice president of communications for an insurance agents’ association. Steve can be reached at [email protected]. Follow him on Twitter @INNstevem.

© Entire contents copyright 2020 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.

Steven A. Morelli is a contributing editor for InsuranceNewsNet. He has more than 25 years of experience as a reporter and editor for newspapers and magazines. He was also vice president of communications for an insurance agents’ association. Steve can be reached at [email protected].