Even as DoL reviews fiduciary rule, it’s ready to enforce it
November 16, 2017 by Kenneth Corbin
While the Department of Labor may yet revise or rescind the fiduciary rule, the agency also stands ready to bring enforcement actions against advisors who put their interests ahead of clients in egregious cases, says Secretary Alexander Acosta.
“So long as companies are proceeding in good faith to implement the best interest standard, we are in a compliance assistance mode,” Acosta told members of the House Committee on Education and the Workforce. “But if companies are not proceeding in good faith, we still have enforcement authority. And so if there are willful violations, we do have enforcement authority.”
Acosta was referring to the first ― and least controversial ― part of the Labor Department’s fiduciary rule, which stipulates that advisors must offer retirement advice that is in the best interest of their clients.
The department has proposed an 18-month delay for implementing the second part of the rule, which includes contractual requirements that brokers and advisors must follow when providing conflicted advice.
At Wednesday’s hearing, Acosta did not offer details on how that process might unfold, telling lawmakers only that his department is reviewing feedback gathered from industry members and other stakeholders.
COORDINATING WITH THE SEC
He did, however, affirm that Labor is partnering with the SEC as it continues its work on the fiduciary issue, citing his published column calling for close coordination between the two agencies while also taking a shot at Obama-era regulators.
“I very publicly, as a matter of fact, suggested that the SEC should be a partner in this effort,” Acosta said. “The SEC declined to be a full partner in the past administration and I do believe that they have an important role to play. They are part of the regulatory structure of this industry and should be a partner, and therefore, yes, we have had discussions.”
Some fiduciary advocates dispute Acosta’s characterization of the SEC’s work with the Labor Department during the Obama administration. Former SEC Chairwoman Mary Jo White repeatedly testified before Congress to her agency’s close working relationship with the Labor Department.
The department’s fiduciary rule has become an increasingly partisan issue, particularly following President Obama’s public endorsement of the policy. (The labor secretary at the time the rule was promulgated, Tom Perez, now heads the Democratic National Committee.) Some Democrats at Wednesday’s hearing echoed the views of many consumer advocates, lamenting what seems to be a general weakening of regulatory protections they see as important consumer safeguards.
“We were making some progress under the Obama administration. It seems that some of that progress is being rolled back,” Suzanne Bonamici (D-Oregon), said of the fiduciary rule and other Labor Department regulations that now seem imperiled.
“We sat in this committee room and had unanimous members of the financial industry say people investing deserve advice that’s in their best interest, so I hope that the department will indeed implement the conflict of interest fiduciary rule,” she said.
Acosta would not commit to any definite outcome for the rule, but offered an assurance that the issue of ensuring high-quality retirement advice is a top priority at his department and the SEC, borrowing a phrase from SEC Chairman Jay Clayton to make the point.
“We are working quite diligent[ly] to do what is in the best interest of, as my colleague at the SEC has said, ‘Mr. and Mrs. 401(k),'” Acosta said. “We understand that Americans have worked very hard for their retirement savings. It is important to protect those retirement savings.”
