In a letter to Labor
Secretary Hilda Solis, copied to SEC Chairman Mary Schapiro, 33 leading House
Democrats urged the DOL to work closely with the SEC in defining the term
fiduciary in the context of providing investment advice under ERISA. The House Members
emphasized that it is essential for the relevant federal agencies to coordinate
their actions and arrive at workable and consistent regulations in order to
ensure that the final regulatory framework preserves current access to investment
information. The members are concerned that DOL may not be following this
approach with respect to its reproposal. The letter was signed by Rep. Barney
Frank, Ranking Member on the Financial Services Committee, Rep. Carolyn Maloney
(R-NY), Ranking Member on the Financial Institutions Subcommittee.
The House Members
detect a lack of meaningful coordination between the DOL and the SEC, despite
the fact that the SEC is engaged in a parallel project. This lack of coordination
is particularly acute because the SEC project is driven by a statutory directive
in the Dodd-Frank Act and thus is subject to clear Congressional guidelines,
while the DOL’s is not. In the view of the Members, real coordination between
the DOL and the SEC would better reflect the intent of Congress and Executive
Order 13563 on improving the process of adopting regulations, which emphasizes
the need for greater coordination across federal agencies and harmonization.
Achieving such
coordination and harmonization, said the House Members, would entail jointly
requesting information, developing guidance in parallel with the SEC based on
this information, and ensuring consistency in that guidance by promulgating
regulations simultaneously with the Commission. Unfortunately, said the Members,
DOL has shown little interest in engaging in joint data requests or coordinated
rulemaking with the SEC.
The Members also
noted that DOL’s data requests to the securities industry have been unrealistic
in both scope and timing. While DOL should consult with the industry in
gathering its cost-benefit information, DOL asked industry representatives for
detailed data on every investment, every investor, and every recommendation for
the last ten years in every context, including IRAs, plans, and regular retail
accounts. Describing this sweeping request as impractical on its face, the
Members noted that different securities firms keep data in different ways for
different periods. Thus, generating 10-year data in the ways requested by DOL would
be a difficult if not impossible task.
More broadly, while the
Members appreciate that DOL agrees that any significant regulatory overhaul must
be justified by a thorough and data-driven analysis, DOL’s approach to that analysis
may not be on the right path. The data requests should be focused on the
critical national need for investment information and education, emphasized the
House Members, but instead the requests for data from the securities industry
indicate that DOL may be headed in a direction that could actually restrict access
to investment education and information. Without evidence of a problem that
would justify such restrictions, the Representatives are troubled by this
direction.