Several potential stumbling blocks have surfaced in the past couple of months that could stymie—or outright derail—release of the Securities and Exchange Commission and Department of Labor's fiduciary rules.
Two bills have surfaced—one in June and the other in July—that attempt to stop Assistant Secretary of Labor Phyllis Borzi's plan to release a reproposal of DOL's fiduciary rule in the fall. However, at least two industry officials believe that DOL's fiduciary train "has left the station," and is headed to the Office of Management and Budget (OMB).
Then in early August, a group of 10 Democratic senators urged the OMB to carefully review the DOL's fiduciary reproposal to ensure that it doesn't "directly conflict" with or "upend" the Securities and Exchange Commission's work on its fiduciary rule.
Meanwhile, with new data to digest after the July 5 close of its comment period on the costs and benefits of a fiduciary rule, as well as two new commissioners having taken their seats at the SEC, industry officials predict any rule proposal from the SEC won't be released until year-end at the earliest.
"This should take time," said Knut Rostad, president of the Institute for the Fiduciary Standard. "With new commissioners on board" at the SEC "and new research data to absorb, in some key respects we are starting anew" on an SEC fiduciary rule.
Kara Stein and Michael Piwowar, President Barack Obama's picks to be the two new SEC Commissioners, were sworn in on Aug. 9. Stein, an aide to Sen. Jack Reed, D-R.I., replaces SEC Commissioner Elisse Walter, a Democrat. Piwowar, an economist on the Senate Banking Committee's staff, replaces Republican Commis-sioner Troy Paredes.
For the DOL, the first bill, introduced by Rep. Ann Wagner, R-Mo., would require that the Department wait to repropose its fiduciary rule until 60 days after the SEC issues its fiduciary proposal. Wagner's bill, the Retail Investor Protection Act, passed out of the House Financial Services Committee by a 44-13 vote and has been referred to the House Education and Workforce Committee for consideration.
Granted, Wagner's bill would have to pass the full House and get Senate approval, but industry and consumer trade groups worry that it could stop both agencies' rules in their tracks. In a joint letter, the groups—which included the Investment Adviser Association, the Financial Planning Association, the CFP Board, the AARP, the North American Securities Administrators Association and the National Association of Personal Financial Advisors—said that Wagner's bill "linking" the DOL and SEC rulemakings would not only prevent the DOL from moving forward with a rule on the definition of fiduciary under the Employee Retirement Income Security Act (ERISA), but the bill "potentially halts DOL's rulemaking altogether if the SEC does not act on a fiduciary rule."
The second attempt by Congress to stymie the DOL's effort to release its fiduciary reproposal came when Sen. Orrin Hatch, R-Utah, introduced legislation in early July that would return oversight of IRAs to the Treasury Department—stripping that oversight from DOL.
