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Sparks fly as DoL nominee, Sen. Warren spar over fiduciary rule's fate

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President Trump's nominee to head the Department of Labor is pledging a thorough review of the fiduciary rule that could lead to a repeal or revision of the controversial regulation.

At his confirmation hearing on Wednesday, Alexander Acosta sparred with Senator Elizabeth Warren (D-Mass.) over the rule's fate, but insisted that, if confirmed, he would abide by Trump's directive that explicitly calls for a review of the fiduciary regulation.

"The executive action, as I recall, directs the secretary of labor and the Department of Labor to repeal or revise the fiduciary rule if any of the criteria laid out in that executive order is found. And so that criteria really regulates and determines the Department of Labor's fiduciary rule," Acosta said during his confirmation hearing before the Senate Health, Education, Labor and Pensions Committee.

The presidential memo, issued last month, directs the department to reassess the fiduciary rule to determine whether it is likely to reduce investors' access to retirement advice, lead to other adverse effects for investors or retirees, or increase litigation. Critics of the regulation have predicted that each of those scenarios will come to pass if the rule goes forward, leaving millions of retirement savers without investment advice. The measure has a looming applicability date of April 10, though the department has recently proposed a 60-day delay.

Acosta was cagey about his personal views on the fiduciary rule, and declined to spell out positions on a number of other Labor Department regulations that lawmakers asked about. Instead, he repeatedly cited Trump's executive actions directing departments and agencies to conduct a thoroughgoing review of current and pending regulations with an eye toward slashing the federal bureaucracy and compliance burdens for businesses.

In a testy exchange with Sen. Warren near the end of the hearing, however, Acosta did indicate that he sees the rule as having a disruptive impact beyond simply applying new standards for how advisers provide investment advice.

"Senator, with respect, the rule goes far beyond simply addressing the standard of conduct" for investment advisers, Acosta said.

"How does it go beyond addressing the standard of conduct of investment advisers?" Warren shot back. "I've read this rule. This is about the standard of conduct, and it says the standard of conduct is an investment adviser can no longer recommend products that are going to earn a whole lot more money for the investment adviser at the cost of giving a worse product to the person ― the retiree, the investor. That's all it's about."

Stocks and Puerto Rican bonds are the focus of many cases among clients, advisers and firms.
March 10

When Warren further pressed Acosta on whether he supports the rule, he demurred, again referring to the president's directive on the issue.

An exasperated Warren, over her allotted time for questioning, dropped the issue, but registered her opposition to the nominee.

"You have dodged every one of my questions. None of these were trick questions," she told Acosta.

She added: "If you can't give me straight answers on your views on this, not hide behind an executive order, but your views on this, then I don't have any confidence you're the right person for this job."

Committee Chairman Lamar Alexander (R-Tenn.) quickly offered a counterpoint as he wrapped up the hearing.

"I wouldn't have any confidence in you for the job if you did answer the question that way, because I have a completely different view than Senator Warren does," he told Acosta. "I think the fiduciary rule deprives millions of Americans of an opportunity for advice. We have a different point of view."

At the outset of the proceedings, Alexander had blasted the fiduciary rule for driving up the costs of investment advice, calling the measure one of a number of Labor Department regulations that together constituted a "big wet blanket of costs and time-consuming mandates on job creators."

Warren summed up the central argument advanced by champions of the rule, saying that it "will require advisers to recommend retirement products that are in the customer's best interest, instead of products that give advisers the highest commissions or the fanciest prizes."

She cited the government estimate that conflicted retirement advice costs investors $17 billion annually, and argued against the Labor Department's pending proposal to delay the applicability date of the fiduciary rule.

Acosta is the dean of the law school at Florida International University, and a government veteran who has served as an assistant attorney general, federal prosecutor and a member of the National Labor Relations Board.

Acosta is Trump's second nominee to head the Labor Department. His first pick, fast food executive Andrew Puzder, withdrew his nomination after Republican lawmakers raised concerns when the revelation surfaced that Puzder had previously employed an undocumented worker as a housekeeper.

Committee members can submit additional questions for Acosta through Thursday, and Alexander ordered the hearing record to remain open for 10 days. He expressed confidence that Acosta, who cleared Senate confirmation three times during the George W. Bush administration, would again be confirmed when the full chamber takes up his nomination.

"I have no doubt that you will be this time," Alexander said.

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