DOL Fiduciary Rule Near

We may be as little as ten days away from the final form of the controversial fiduciary standard rule from the Department of Labor (DOL). We have blogged previously (here and here for example) about the new proposed standard, and in January it was sent to the Office of Management and Budget for a required review before publication, which typically takes 90 days, but can be extended to 120 days by the OMB per a 1993 executive order.

Anticipating the final rule, congress readied two new bills in February that would require their approval of the final DOL rule before it could be enacted. That approval is not likely to happen, meaning a revised standard would be sent by Congress to the President, where that legislation would likely be vetoed, as President Obama has previously voiced his support for the proposal. Last year Congress  passed a different bill that would require the SEC to adopt a fiduciary standard before the DOL could adopt one, which they seem unlikely to do.

SEC Chair Mary Jo White addressed lawmakers at a House Appropriations subcommittee hearing this week, noting that it was entirely possible that the DOL standard and the SEC standard could diverge from one another. She went on to say that she could not anticipate when the SEC standard would be forthcoming nothing that it is "...not up to me alone," alluding to the fact that at least two other SEC commissioners would have to join her in crafting and bringing forward that standard.

A recent Senate report indicated that the DOL had ignored input from the SEC in crafting their fiduciary standard, something Chair White disputed in her recent testimony, noting that they had given "substantial technical assistance" to the DOL. Despite her dismissal of allegations that the two agencies had not been working together, there was one area in which she indicated that the SEC would not support the DOL: enforcement. Congressman Amodei questioned whether the DOL could enforce the contracts required by the rule between advisors and their clients, which gives investors the option to pursue claims in court or in arbitration forums. Chair White indicated that the SEC was unlikely to help enforce the rule saying, "We don't enforce the Labor Department rules per se. Our enforcement authority is under the federal securities laws.”

In the upcoming week, there will likely be more positioning changes among the two agencies, the President, and Congress before the final rule is released.