NAIFA's GovTalk

Battle to Kill the Fiduciary-Only Rule Heats Up

Written by NAIFA | 1/16/24 8:33 PM

Repeating their testimony at a DOL hearing last month in comments submitted to DOL, industry advocates told a January 10 House hearing that the DOL’s fiduciary-only proposed regulations must be withdrawn. Fifty House members wrote to DOL demanding the rule’s withdrawal. DOL must sift through 19,000+ comments on the rule.

In short, pressure on DOL and Congress is intensifying in an effort to kill the latest fiduciary-only proposal from DOL’s Employee Benefits Security Administration (EBSA). Here are current developments:

  • The House Financial Services Committee’s Subcommittee on Capital Markets held a hearing January 10 to examine the fiduciary-only rule proposal. Industry advocates came out swinging against the proposed rule, pointing out it exceeds DOL’s authority, it fails to accommodate the reasons the Fifth Circuit Court of Appeals overturned the agency’s previous version of the bill, it makes professional investment advice unaffordable or inaccessible to many middle-class retirements savers, and it impacts products (annuities, individual-owned IRAs) over which DOL/EBSA has no jurisdiction. NAIFA submitted a statement for the record of the hearing, incorporating our DOL comment letter (see letter below).
  • On January 8, 50 House lawmakers wrote to DOL demanding withdrawal of the fiduciary-only proposal. Led by Reps. French Hill (R-AR)—a leading contender for the chairmanship of the House Financial Services Committee after current chair Rep. Patrick McHenry (R-NC) retires at the end of this Congress—and David Scott (D-GA), the letter echoes the arguments made in the industry’s testimony before DOL last month, its comments submitted to the agency, and the testimony offered at the January 10 Financial Services Subcommittee hearing.
  • NAIFA submitted detailed comments to DOL ahead of the January 2 close of comments deadline, making these same arguments. NAIFA pointed out the results of its member survey that indicate that while 70 percent of respondents currently offer advice to individuals without regard to the level of investment they can make, that number drops to 28 percent should the fiduciary-only proposal take effect.
  • Last month, prior to GOP leadership pulling the DOL appropriations bill from the floor, the House approved, by voice vote and thus on a bipartisan basis, an amendment to the DOL funding bill that would have prevented DOL from doing any further work on the fiduciary-only proposal. The DOL funding bill was not voted on by the full House, but the approved fiduciary-only amendment is another shot at the proposal.

EBSA received more than 19,000 comments on its proposed rule. Some, to be sure, expressed support for the proposed rule, but most such support focused on the belief that investment advisors should act in their clients’ best interest. This is something NAIFA members also support. But putting a client’s best interest ahead of an advisor’s interests is already assured by strong state regulation, the Security and Exchange Commission’s Regulation Best Interest, and current regulations imposed on broker-dealers. It is not something additional to be accomplished by the fiduciary-only proposal.

Prospects: It will take considerable time before the fiduciary-only proposal’s fate is determined. At this juncture it appears unlikely that any of the defunding efforts will succeed. If EBSA does not bow to pressure and withdraw the proposal, the agency may modify it prior to finalization. Whether or not it is modified, the industry vows to challenge a final rule in court, and says prospects for a favorable court ruling are good. But we are at least months, if not longer, away from knowing the outcome of this struggle.

NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations, at dboyle@naifa.org; or Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org; or Michael Hedge – Senior Director – Government Relations, at mhedge@naifa.org.