Lawmakers: Department of Labor Should Work with SEC, Reconsider Risky Fiduciary Rule Proposal

By Lisa Bleier

Rep. David Scott (D-GA) and Rep. French Hill (R-AR) join CNBC’s John Harwood at SIFMA’s 2015 Annual Meeting, The Capital Markets Conference.

At SIFMA’s 2015 Annual Meeting, The Capital Markets Conference, Democratic and Republican House lawmakers reiterated bipartisan concerns about the Department of Labor (DOL) fiduciary rule, urging that the agency work along with the Securities and Exchange Commission.

“Dodd-Frank gave the SEC the responsibility to do this. That was five years ago. They’ve done their study. I bet they have a draft proposal — they should have put it out and not let Labor get over and pre-empt their territory,” Rep. French Hill (R-AR) said on Tuesday.

Both Hill and Rep. David Scott (D-GA) emphasized that the Dodd-Frank legislation designated the SEC specifically for this task. In fact, Scott recalled anticipating this issue while working on the reform act.

“We knew that the issue of fiduciary standard might come up,” he said, “We clearly stated that the fiduciary authority, when it comes time to examine it, would be done by the proper person who should do it, which is the Securities and Exchange Commission. Those are the people that have the particulars, who deal with the securities.” Now, Scott said, the Department of Labor “sort of squeezes in the back door. We’re at this point because the Securities and Exchange Commission is not doing what they should be doing.”

Both Scott and Hill criticized the DOL proposal, which they believe will increase liability risk and costs for brokers, making investment advice more expensive.

“Finance advice is critical. Without it, you’re not going to build the wealth, you’re not going to have the saving,” Scott said. “If you want to help the people who really need help in our country, you don’t stop them from getting financial advice.”

“These are real critical issues here and the Labor Department is not handling them in the way and in the manner that the complexity of the issue does. By denying advice, by denying education to the people who need it the most, that’s who you’re hurting,” Scott added.

The lawmakers, among a number of bipartisan members of Congress with concerns about the proposal, stressed that the Obama administration needs to take control of this issue and provide a more coordinated approach.

“If you were the SEC chairman, wouldn’t you stand up to the Labor Department and say ‘Hey, sorry boys — the law says that we’ve got to handle this’ and secondly, ‘What sense does it make to have two fiduciary definitions?’” asked Scott.

With parallel work from the DOL and SEC, “you’re also creating a dual set of standards in firms for dealing with the public, which is a terrible idea,” added Hill. “[Treasury] Secretary Lew [and] OMB Director Donovan should, with their chief financial officer hat, say that this is no way to run a railroad.”

Hill argued that this is not a complicated issue. “What it is is uncoordinated,” he said. “I think that the Secretary of the Treasury should make sure that this doesn’t happen. His job is to look out for the entire economy, for our consumers, and if he was doing a good job, he’d make sure that the DOL and the SEC work together on this, just like Dodd-Frank asked them to.”

Visit SIFMA’s DOL Fiduciary Resource Center at www.sifma.org/dol-fiduciary

Lisa Bleier

Managing Director and Assistant General Counsel

SIFMA