The Financial Services Institute (FSI) today reacted to answers by Department of Labor (DOL) Secretary Hilda Solis to questions asked by members of the House Education and Workforce Committee on their work towards reproposing their fiduciary rule.
While a number of members of the committee weighed in on this issue, Rep. Carolyn McCarthy, Democrat of New York, used her joint experience with her dual duties on the House Financial Services Committee to shed light on this flawed process.
Rep. McCarthy said she’s pleased DOL withdrew the last rule and asked where the response to her November letter on the proposal was since she hasn’t received a response (this letter had 32 Democratic member signatures). She also questioned why the industry is only getting “a day’s notice” to get back with DOL with information, especially when the SEC has no time line for their fiduciary rulemaking.
“I think that’s poor timing, especially when the SEC has no time line,” Rep. McCarthy said. “I think it’s time, to be very honest with you, for many of us, the members of Congress, to sit down with the heads [of the department] and try to figure out how we’re going to go on this. … I think it’s really very important because this has been dragging on now for quite a long time. It’s not good. Businesses need to know what they’re going to be doing. Certainly we, many of us here on this particular committee, many on the Financial Services Committee, would like to work together and see if we can come to some sort of resolution in the near future.”
Rep. Rush Holt (D-NJ): “I’m concerned the department is asking the wrong questions. This won’t get to the issue of how employees make the right decisions. … How we can increase access to investment advice. Are you finished asking for additional data? I hope not.”
Rep. Phil Roe (R-TN) focused his question on the fact that DOL is offering a solution in search of a problem: “What problem with the small investors are you trying to fix, because it’s not clear to me. … For the small investors like my daughter, what are you trying to fix?”
Secretary Solis went on to say they are trying to protect American savings, which is a goal, not a problem. She said she had cases where people lost their savings, to which Rep. Roe replied: “We have laws against robbing banks but people still do it. So, dishonest people will do dishonest things. But most of these brokers are not dishonest people. They’re trying to share with a small investor some advice so they can invest their 10 or 15 or 20 thousand dollars.”
Rep. Judy Biggert (R-IL) asked if, as they did in the past with the Department of Treasury, DOL would issue a joint Request for Information (RFI) with the Securities and Exchange Commission (SEC) since Congress actually mandated the SEC to come up with a new fiduciary standard, not DOL.
Secretary Solis said she couldn’t say whether they’ll issue that joint RFI because of the Administrative Procedures Act. She also declined to say how the new rule would differ from the old rule.
Rep. Martha Roby (R-AL) also stated that she had not received a response back from her letter to the Department, and Secretary Solis responded that it came in after their comment period closed.
Please see below for reaction by FSI General Counsel and Director of Government Affairs David Bellaire:
“Once again, today’s hearing proves that opposition to this rule which would price out millions of investors out of the market for advice on their IRAs is bipartisan, and fierce. While the SEC has been mandated by Dodd-Frank to develop a new fiduciary standard, the DOL has inserted itself in the process, with reckless disregard for the will of Congress. When pressed again today to simply state what the problem is they’re trying to fix, or to work with the SEC and issue a joint RFI, they continued to dodge the critical questions. Hard-working American investors deserve to have a government that works with them, not against them. We should start with the problem that needs to be fixed, not the solution, a solution that would leave millions of IRA investors without access to advice from a financial advisor that is critical to their financial future.”