Lawmakers demand information on DOL-SEC consultation on proposed fiduciary rule

House lawmakers in early March, 2015, took action to obtain confirmation that the Department of Labor (DOL) and the Securities and Exchange Commission (SEC) are consulting with each other in the development of a pending regulatory proposal to expand the definition of fiduciary under ERISA. House Education and the Workforce Committee Chairman John Kline (R-MN) and Health, Employment, Labor, and Pensions Subcommittee Chairman Phil Roe (R-TN) have requested that Secretary of Labor Thomas Perez provide, by March 18, 2015, documents and communications related to the DOL’s consultation with the SEC regarding the new proposal to alter the fiduciary standard.

Proposed rulemaking

In late February, 2015, President Obama directed the DOL to move forward with its long-anticipated proposed rule that would more broadly define the circumstances under which a person is considered a fiduciary under ERISA by reason of giving investment advice to an employee benefit plan. According to a White House statement, the Employee Benefits Security Administration (EBSA) will soon formally propose a new rule that would expand the types of retirement investment advice subject to ERISA (see
Pension Plan Guide Newsletter No. 2148, March 3, 2015).

EBSA had previously issued proposed regulations in October 2010 that attempted to address these issues. The rules came under intense criticism and in 2011 EBSA announced it would be re-proposing the rules.

Lack of coordination?

The House lawmakers echoed concerns voiced by SEC Commissioner Daniel Gallagher that coordination between the DOL and the SEC regarding the regulation of investment advice was not taking place. “We are especially disappointed and alarmed by Commissioner Gallagher’s allegations that no meaningful engagement has occurred,” said Reps. Kline and Roe in their letter. They requested that DOL “furnish all communications after September 19, 2011, between DOL and SEC regarding this rulemaking.”

Legislative action

Reps. Kline and Roe reminded Secretary Perez that the House passed legislation in October 2013 (H.R. 2374) that would have prohibited the Labor Department from issuing any regulations under ERISA defining the circumstances under which an individual is considered a fiduciary “until 60 days after the SEC issues a final rule governing standards of conduct for brokers and dealers under specified law.” While that effort failed in the Senate, Rep. Ann Wagner (R-MO) reintroduced the Retail Investor Protection Bill (H.R. 1090) on February 25, 2015, days after the White House made its announcement.

Source: “Committee Leaders Seek Information on Fiduciary Rulemaking,”

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