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From Securities Regulation Daily, January 29, 2016

OMB entry may signal endgame for Labor Dept. fiduciary rule

By Mark S. Nelson, J.D.

A routine entry in the database of the OMB unit that reviews executive branch rule proposals suggests the endgame may be nearing for the Department of Labor’s most recent attempt to raise the fiduciary bar for those who advise retirement savers. The DOL has twice proposed upping the standards for advisers, each time being criticized for going too far or not far enough, fast enough. Early last year, the Obama Administration pushed DOL to go forward with its latest proposal based on a report published by the Council of Economic Advisers on conflicted investment advice.

A hallmark of the DOL’s proposal is its "best interest contract exemption," a provision that would let fiduciary advisers and their firms collect fees not typically permitted to them if they agree to take steps that ensure clients’ interests will come first. The proposal also has many carve-outs, including for swaps and security-based swaps.

Beyond the controversy over the proposal’s text, a tug-of-war has emerged between those who want the DOL to speed the final version of the rule and those who would delay new DOL action until the SEC decides if it will use its Dodd-Frank Act authority to re-define who is a fiduciary.

Legislation. The Retail Investor Protection Act (H.R. 1090), sponsored by Rep. Ann Wagner (R-Mo), would have the SEC act on fiduciary standards before the DOL finalizes its rule. The Wagner bill cleared the House Financial Services Committee last September by a recorded vote of 34-25 and passed the full House a month later by a vote of 245-186. The Administration has said it strongly opposes the bill.

Representative Wagner has once again called for the DOL to slow its rule upon learning the agency submitted it for OMB review. “The Department of Labor has ignored Congress, thumbed its nose at the thousands of Americans who have expressed concerns about the impact this Rule will have on family savings and jobs, and has charged blindly forward with this executive overreach.”

Moreover, Reps. Peter Roskam (R-Ill) and Phil Roe (R-Tenn) have introduced tandem bills (H.R. 4293H.R. 4294) that would amend the Internal Revenue Code and the Employee Retirement Income Security Act of 1974 to bar the DOL from making its rule effective without Congressional approval.

SIFMA weighs in. Kenneth Bentsen, Jr., president and CEO of the Securities Industry and Financial Markets Association, urged the OMB to carefully evaluate the proposal, which has spurred many hundreds of public comments. “The OMB has a statutory mandate to get this right. To do so, it must fully assess the economic impact of the DOL's rule to ensure it serves the best interest of American investors without making saving harder and causing them undue harm.”

Companies: Securities Industry and Financial Markets Association

MainStory: TopStory BrokerDealers Derivatives DoddFrankAct FiduciaryDuties InvestmentAdvisers Swaps

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