Rep. Wagner Statement on Labor Fiduciary Rule

April 14, 2015

WASHINGTON, D.C. – Congresswoman Ann Wagner (R-MO) released the following statement regarding the proposed fiduciary rule from the Department of Labor issued today.

"Today's proposed rule from the Department of Labor potentially harms the very people that it claims to protect: low- and moderate-income Americans seeking advice for investing for their retirement. It would greatly expand the definition of a fiduciary under ERISA and fails to take into account the vast regulatory structure already in place," Rep. Wagner said. "While OMB typically reviews Labor rules for an average of 117 days, this was pushed through without a full review process in just 50 days. We believe that the SEC should go first in regulating this space, and we hope that Democrats who have supported that position previously continue to do so."

"This ill-advised, top-down assault on local financial advisers and broker-dealers is typical of President Obama and Sen. Elizabeth Warren. Instead of allowing hard-working Americans access to affordable, sound financial advice to prepare for the future, they have created a solution in search of a problem to further hurt the middle class," she continued.

Rep. Wagner is a member of the House Financial Services Committee. In February, she introduced the Retail Investor Protection Act to counter the proposed rule.

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Retail Investor Protection Act
Bill Summary:
The new legislation will follow the same structure as legislation passed last Congress in that the SEC would be required to go first in issuing a rulemaking under Section 913 of Dodd Frank before the DOL is able to propose a rule expanding the definition of a fiduciary under ERISA. In addition, the SEC would be required to look into potential issues with a rule making establishing a uniform fiduciary standard in regards to investor harm and access to financial products that were not adequately addressed in the agency's 2011 study. Finally, the SEC would be required to look into other alternatives outside of a uniform fiduciary standard which could help with issues of investor confusion.

Background:

The Department of Labor is set to re-propose new fiduciary rules under the Employee Retirement Income Security Act (ERISA) of 1974. At the same time, the SEC is considering using permissive authority granted under Section 913 of Dodd-Frank to adopt a "uniform fiduciary standard" for brokers and investment advisers. The lack of coordination between the two agencies in preparing and issuing their regulations has been a cause of great concern.
On Monday, February 23^rd, President Barack Obama along with Senator Elizabeth Warren and CFPB Director Richard Cordray announced that the DOL rule was moving forward and being submitted to OMB.
This follows the leak of a WH memo earlier this year prepared by Council of Economic Advisers Chairman Jason Furman in support of DOL moving forward with a rule that drew widespread criticism. SEC Commissioner Dan Gallagher recently said this memo "is thinly veiled propaganda designed to generate support for a widely unpopular rulemaking."
Ultimately, there is concern that both of these rules, especially from the DOL, will end up increasing costs and pricing low- and moderate-income Americans out of the financial advice market by making it less cost-effective to service small accounts.
The DOL's first fiduciary proposal in 2010 received broad bipartisan opposition by Members of Congress as well as industry stakeholders, and ultimately the proposal was withdrawn in 2011.
- One study pointed out that the rule could have increased costs to owners of individual retirement account (IRA's) by up to 195%, and that millions of IRA owners could be shut out of the financial advice market.
- Letters were sent out by members of the Congressional Black Caucus, the New Democrat Coalition, several Senators of both parties, and several Republican members of the House Financial Services Committee.

Legislation:

The Retail Investor Protection Act would prohibit the DOL from issuing new fiduciary rules under ERISA unless the SEC first issues a rule under Section 913 of Dodd-Frank.
Before issuing a rule for a uniform fiduciary standard, the SEC would have to provide a report to the House Financial Services and Senate Banking Committee on whether current standards are a source of investor harm and whether such a rule would limit access to financial advice.
- Additionally, as part of the report the SEC would be required to look at alternative remedies to a uniform fiduciary standard that would address investor confusion, including simplifying titles used by professionals and enhancing disclosures.
- This provision came about after testimony by Stephen Luparello of the SEC in front of HFSC last year, in which he said that use of titles was worthy of additional consideration by the agency.
These requirements will ensure that any potential SEC rulemaking is actually solving the problem it seeks to address, and that the SEC and DOL are able to coordinate with each other.