Former House Financial Services Committee Chairman Spencer Bachus as well as the Securities and Exchange Commission's former inspector general, David Kotz, agreed Tuesday that the Department of Labor is out of bounds by moving forward on a rule to amend the definition of fiduciary for retirement advice.
"From a statutory standpoint, the DOL has no jurisdiction" to regulate investment and retirement products by amending the definition of fiduciary under the Employee Retirement Income Security Act, Bachus told attendees at the MarketCounsel Summit in Miami Beach on Tuesday. "The SEC is the primary securities regulator; they need to be more aggressive in defending their turf."
Agreed Kotz: "That's exactly right; I don't know that DOL got that memo." He added that while it's possible that a rider may be attached to the omnibus spending bill to delay DOL's rulemaking, it also wouldn't "shock" him to see a final rule by DOL next spring.
It isn't yet known how far the final DOL rule will stretch into the SEC's realm of securities regulation. But Barbara Roper, director of investor protection for the Consumer Federation of America, says there are other issues at play.
"The SEC has absolutely no authority to write rules under ERISA," Roper says in a comment on this article. "On the contrary, DOL has clear and exclusive authority to do so. The SEC's jurisdiction relates exclusively to the securities laws. So, if the SEC were to write rules, those rules would not cover advice to retirement plans, and they would not cover advice about non-securities, like insurance, which plays a significant role in the retirement marketplace."
On whether brokers should be held to a fiduciary standard, Kotz replied that "clarity and lack of confusion is what's most important for investors, not necessarily higher standards."
