Does DOL fiduciary rule comply with Obama executive order?

The Investment Company Institute has requested a meeting with a chief administrator at the Office of Management and Budget regarding the Department of Labor's regulatory impact analysis of its proposed fiduciary rule.

That request comes as OMB is likely entering the final stages of its review of the DOL proposal.

Some predict OMB will release the rule as early as the second week in March; most are calling for a release by the end of March.

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The DOL's rule intends to redefine who a fiduciary is as it relates to advisors to most of the country's defined contribution plans, and all advisors to IRA owners.

The regulatory impact analysis the DOL provided as part of its proposal does not justify the "massive overhaul of the retirement marketplace that the rule as proposed would impose," according to the letter ICI sent OMB requesting a final meeting.

The ICI, which represents the interests of mutual funds and investment managers, and other stakeholders have previously made public their concerns over DOL's regulatory impact analysis in comment letters posted to the DOL.

But this time the ICI's letter brings specific attention to Executive Order 12866, and does so as Republican Senate staffers have produced a report suggesting the DOL willfully ignored recommendations from the Securities and Exchange Commission to conduct a more thorough cost-benefit analysis of the proposal.

That report, produced by the majority staff to the Committee on Homeland Security and Governmental Affairs, also notes Executive Order 12866, which was issued by President Clinton in 1993, as well as Executive Order 13563, which was issued by President Obama in 2011.

Executive Order 12866 says regulators "shall assess both the costs and the benefits of the intended regulation" and that a regulation be adopted "only upon a reasoned determination that the benefits of the intended regulation justify its costs," according to a copy of the order.

President Obama's executive order is said to reaffirm the principals created in EO 12866, according to a summary of the orders by the Environmental Protection Agency.

EO 12866 also requires regulators to identify "available alternatives" to proposed regulation.

In the Republican staffers' report, communications between regulators reveal that SEC staff urged DOL to "consider quantifying the costs and benefits of all the alternative approaches we considered and rejected," the report says.

But a DOL official rejected that recommendation, writing in a communication to SEC that, "we think this would be extraordinarily difficult and would appreciably delay the project for very little return," according to quotes provided in the Republican committee staffers' report.

The question of timing has of course loomed large in the debate over the proposed fiduciary rule.

Proponents of the rule and the Obama Administration have argued that legislative attempts to make the SEC the lead regulator in crafting a fiduciary rule, and other efforts to require Congress to approve a new rule, amount to stall tactics.

Opponents of the rule say DOL is racing to finalize a rule by the end of President Obama's final term.

In its letter to OMB requesting one last chance to make its case, ICI retreads several arguments that it says prove the inadequacy of DOL's regulatory impact analysis.

The often-cited claims that investors lose $17 billion annually to conflicted advice are "just wrong," the ICI letter says.

ICI also argues that brokers earnings on commission-sold products are often less than fees fiduciaries charge for advice, a recognizable argument to those familiar with the long debate over the DOL's rule.

Moreover, ICI says DOL's regulatory impact analysis fails to account for the societal harm that would result from reduced access to investment advice for low and middle-income savers, an unintended consequence of the proposal, argue its opponents.

A request for comment to the DOL as to whether or not the proposed fiduciary rule complies with Executive Orders 12866 and 13563 was not returned.

A request to the ICI as to whether OMB will agree to meet the trade group was not returned before going to print.

In the cross-hairs of the DOL rule: Dually registered advisors

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