DOL, SEC Appear To Be Harmonizing Fiduciary Standard

The Department of Labor signaled that it is planning to harmonize its final word on its Conflict of Interest Rule with the Securities and Exchange Commission’s best interest standard, according to a prominent industry lobbyist.

That was the interpretation of the Office of Management and Budget's issuing a fall agenda that lists a final rule for the DOL’s fiduciary and SEC’s Regulation Best Interest standards due in September 2019, according to Bradford P. Campbell, a partner with Drinker Biddle & Reath, a Washington, D.C., law firm.

“It’s the DOL and the SEC trying to end up in the same place in terms of regulation,” said Campbell, former assistant secretary of labor for employee benefits and former head of the Employee Benefits Security Administration.

Campbell said that in response to surprise expressed by fellow Drinker Biddle partner Fred Reish during a policy conference call on Thursday. In June, a federal court officially killed the DOL’s Conflict of Interest, or fiduciary, rule after judges ruled that the department had overreached its authority with the regulation.

The DOL had issued temporary guidance, but the regulation was considered dead because of the court’s ruling. The department’s agenda item is called Fiduciary Rule and Prohibited Transaction Exemptions, with a final rule scheduled September 2019.

The clarification on PTEs would help financial and insurance companies understand the status of exemptions, such as commissioned sales with qualified money, which is exempted by PTE 84-24. Some in the industry have asked whether that exemption is intact.

Meanwhile, the SEC is working on a rule called Regulation Best Interest, in accordance with the Dodd-Frank financial reform law.

The SEC has issued a rule that largely leaves insurance sales untouched although it defines brokers and advisors (or advisers) more strictly.

But many critics, including congressional members, are saying the rule does not raise the standard for brokers.

The commission conducted public sessions on financial issues and reactions to the rule earlier this year in an effort to refine the final rule.

Steven A. Morelli is editor-in-chief for AdvisorNews. 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 smorelli@adnewsfeedback.com.

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