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Lawmakers Tell DOL to Halt New Fiduciary Rule

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Ahead of a Jan. 10 hearing on Labor’s new fiduciary rule, members of Congress warned acting Labor Secretary Julie Su to cease work on the rule, which they argued “includes significant, unnecessary, and counterproductive changes to the existing regulatory framework governing the conduct of financial professionals who provide personalized investment advice to retirement savers.”

In a letter dated Jan. 8, 45 Republicans and five Democrats told Su and Lisa Gomez, the assistant secretary of Labor for the Employee Benefits Security Administration, that Labor’s “past efforts to expand these rules, which federal courts have repeatedly rejected, dealt a devastating blow to millions of American workers and retirees by impairing their ability to obtain much-needed affordable financial professional help to prepare for and achieve a secure and dignified retirement.”

The lawmakers, which included Rep. Ann Wagner, R-Mo., urged Labor “to cease its efforts to adopt this proposal in order to prevent needlessly inflicting harm on millions of retirement savers across the country.”

The House Financial Services Capital Markets Subcommittee, chaired by Wagner, plans to hold the Jan. 10 hearing to examine the proposal.

In moving forward with this proposal, the lawmakers wrote in their Jan. 8 letter, “DOL has unreasonably dismissed the extensive research and real-world experience decisively demonstrating the 2016 DOL fiduciary rule significantly harmed lower- and middle-income workers before being vacated in federal court.”

The proposed fiduciary definition “goes further than the 2016 fiduciary rule that was invalidated by a federal appeals court ruling,” the lawmakers state. “It would repeal the ERISA five-part test used to determine fiduciary status and replace it with a three-part test, one prong of which would impose fiduciary status on any financial professional who recommends financial products.”

Changes to existing prohibited transaction exemptions PTE 2020-02, which deals with rollovers as well as PTE 84-24, impacting annuities, “could, if adopted, significantly impair their utility for serving retirement savers,” according to the lawmakers.

“As in 2016, the proposal, if adopted, could cause a large number of financial professionals, who currently serve a broad range of customers, to switch to providing service as investment advisers, rather than as insurance agents or registered representatives of a broker-dealer,” the lawmakers told Su and Gomez.

Image: Chris Nicholls/ALM; Bloomberg


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