Harmonizing their rule with DOL is a priority.

After Republican lawmakers pushed hard for a postponement of implementation, the U.S. Department of Labor (DOL) proposed a delay to the applicability of certain fiduciary rule conditions until July 1, 2019, namely, the Best Interest Contract exemption, Principal Transactions exemption and PTE 84-24 (insurance and annuities). The DOL also issued non-enforcement relief from the related PTEs’ prohibitions against class action waivers and qualifications.

WORK WITH DOL

In the latest development, the Securities and Exchange Commission (SEC) announced that a standardized rule is their top priority, and harmonizing their rule with the DOL is high on the agenda. SEC Chairman Jay Clayton told senators about the plan and laid out the four steps the agency will take in pushing forward on a harmonized rule.

During a Senate banking committee oversight hearing on Sept. 26, lawmakers were eager to hear from the chairman on how the agency planned to work with the DOL to ensure that financial professionals are not bogged down in regulations issued by multiple agencies. Sen. John Tester, D-Mont., asked Clayton pointedly when he believed a fully harmonized rule would be released. “This is a priority for me. Everything can’t be a priority for me … but we’re pushing this one,” responded Clayton.

Tim Scott, R-S.C., told Clayton that the DOL fiduciary rule has had a “negative impact” on many Americans and that the restrictions the rule places on financial professionals makes it harder for average Americans to get access to financial advice. While Scott said he was “pleased” that the DOL decided to delay implementation of their rule, he also said, “The last thing we need to do at this point is to find ways to get experts out of the households, which is the unintended consequence of the fiduciary rule.”

Clayton responded to questions about his agency’s coordination with labor by thanking
Secretary of Labor Alexander Acosta for “reaching out to say we should work together on this.” He went on to commit to working together with the DOL on finalizing a harmonized rule.

FOUR STEPS PROPOSED

According to Clayton, the SEC is now reviewing the public comments regarding a request for investors’ opinions and financial advisors on the effects of the DOL rule and what is expected moving forward on “standards of conduct” regulations. Clayton closed the hearing with describing the four steps the agency is proposing in implementing a new fiduciary rule.

First, Clayton said, “Investors must have a choice so they aren’t pushed into a narrow set of circumstances because of whatever steps we take.”

Second, he stated that there must be clarity in the rules, so that “investors know what type of person they’re dealing with and they know the obligations owed to them.”

Third, the chairman stressed the importance of consistency in any rulemaking saying, “If you have two different types of accounts, but you’re facing the same person—a retirement account and a nonretirement account—there ought to be consistency with respect to those accounts.”

Lastly, he stated that the SEC, the DOL and state regulators are working in coordination to devise a way forward with a standardized fiduciary rule.