WASHINGTON The House is set to begin debate today on a bill that would delay, perhaps indefinitely, a proposal by the Department of Labor to impose a fiduciary standard of care on advisors to retirement plans.
An aide to Rep. Ann Wagner (R-Mo.), the sponsor of the Retail Investor Protection Act, said late Monday that the House is scheduled to take up the measure in the afternoon, with a vote planned later in the afternoon or evening.
Wagner's bill would further postpone a proposal first advanced by the Labor Department in 2010, when it advocated for new rules to guard against conflicts of interests for advisors working in the retirement space.
The legislation would bar the department from implementing its rules for retirement plan advisors until 60 days after the SEC finalizes its own proposal that would extend the fiduciary responsibilities that currently apply to investment advisors to broker-dealers.
Additionally, Wagner's bill would direct the SEC to conduct a new study to demonstrate that retail investors are harmed by the current discrepancy between the standards for broker-dealers, which are required to recommend investments deemed "suitable" for their clients, and investment advisors, who under the fiduciary standard must make recommendations in their clients' best interests. Further, the SEC would have to show that a uniform fiduciary standard would not curtail access to investment advice in the retail segment.
Critics have argued that those provisions are a thinly veiled stall tactic that by requiring the resource-strapped SEC to conduct what the Financial Planning Coalition describes as "duplicative and onerous cost-benefit analysis," Wagner's bill would needlessly delay the SEC's fiduciary proposal.
The proposed legislation would set so high a bar -- requiring a showing that investors are 'systematically harmed or disadvantaged' -- that it would substantially impede or completely prevent the SEC from proceeding with a congressionally authorized and long-needed rulemaking that would allow all investors to receive investment advice that is based on their best interests," the coalition wrote in a letter delivered to each member of the House, urging opposition to the measure. The group further warned that the provision requiring the additional demonstration of consumer harm "would increase the likelihood that courts would strike down an SEC uniform fiduciary rule upon legal challenge."
The coalition warned that the bill could knock the SEC's work on a fiduciary standard off course which, coupled with the Labor Department's proposal, could derail both initiatives. The coalition -- a lobbying group that represents the FPA, NAPFA and the CFP Board of Standards -- called Wagner's legislation "the dubiously titled bill Retail Investor Protection Act."
In their advocacy of the Labor Department's proposal, those groups have run up against other industry organizations like the Financial Services Institute, which has argued that the fiduciary rules for retirement advisors could effectively end the commission-based model for advising IRAs, and drive many firms and advisors away from the retirement market, or put them out of business.
Last month, Phyllis Borzi, the agency's assistant secretary for the Employee Benefits Security Administration and the department's point person on fiduciary rulemaking, spoke at an FSI conference in Washington, where she reiterated her commitment to advancing the rule to mitigate conflicts of interest. However, in that same speech, she pushed back the October time table she had previously floated for releasing the proposed rules, without offering a new forecast for when the agency might move forward.
Though the Republican-controlled House is widely expected to approve Wagner's bill, the measure hasnt seen any traction in the Democratic-controlled Senate and the White House has said it strongly opposes the measure. Even still, the political pressure that could arise from todays expected vote -- particularly if proponents count large numbers of members from both parties -- could give the Labor Department pause before it moves ahead with its proposal, according to Neil Simon, vice president for government relations with the Investment Adviser Association, which opposes Wagner's bill and supports the Labor Department and SEC fiduciary proposals.
"If this bill passes the House and if it receives strong support on both sides of the aisle, I think it is something that [Labor Secretary Thomas] Perez will take note," Simon says. "It will likely deliver a message that will be noted by folks in the Department of Labor. This certainly evidences that there is some political pressure to slow the Department of Labor down.
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