Friday, February 13, 2015

Senate Chair Seeks Dialogue Between SEC and DOL on Revised Fiduciary Standard

Senator Ron Johnson, (R-WI) Chair of the Homeland Security and Government Affairs Committee ask the Department of Labor to provide all communications with the SEC on changing the fiduciary standard under ERISA. In a letter to DOL, ed conflicts of interest in this area, including any role DOL had in drafting or advising on the conflict of interest memo issued by the Council of Economic Advisers. Importantly, he also wants DOL to explain how it will ensure how rulemaking relating to fiduciary rules for investment advisers to retirement accounts will not adversely impact middle and lower income groups. The Senator wants a response from DOL on these requests by February 19.

Congress has been greatly concerned with the upcoming revision of the fiduciary standard, In 2013, the House passed legislation that would have prevented DOL from exercising its authority under ERISA to issue a rule defining the circumstances under which an individual is considered a fiduciary until 60 days after the SEC issues a final rule relating to standards of conduct governing broker-dealers under Section 15(k) of the Exchange Act. The Retail Investor Protection Act, H.R. 2374, would also have prevented the SEC from issuing any rule without first finding that retail customers are being systematically harmed or disadvantaged due to broker-dealers operating under different standards of care than those applicable to investment advisers. The Act passed by a vote of 254 to 166. While thirty House Democrats voted for the bill, the Senate never too it up.

Section 913 of the Dodd-Frank Act authorizes, but does not require, the SEC to promulgate rules to extend the fiduciary standard of conduct applicable to investment advisers to broker-dealers when advising retail customers about securities.

Also in 2013, in a letter to DOL, over 30 members of the House of Representatives expressed concern that a new and restrictive definition of fiduciary could add a barrier to accessing qualified retirement planning services. As the DOL considers a reproposed fiduciary standard, the goal must be to increase investor protection without reducing investor access to financial products and services, said the members. Further, any changes to the existing standard should be executed carefully, prudently, and in conjunction with the SEC in order to avoid uncertainty and disruption in the marketplace.