Congressional spending bill does not amend DOL fiduciary proposal
Rule still expected to be finalized next year
On December 16, 2015, Congressional leaders released the draft bill text of an omnibus appropriations bill that would fund the government through the end of 2016. Despite efforts in the House and Senate to include an amendment that would have either blocked funding for the Department of Labor (DOL) to finalize or enforce its “Conflicts of Interest” proposed rule or required the DOL to re-open the comment period for 30 days, the bill did not include either of these provisions.
In addition to the appropriations bill, there are ongoing legislative efforts to affect the rule. On November 5, 2015, a bipartisan group of lawmakers—Reps. Peter Roskam (R-IL), Richard Neal (D-MA), Phil Roe (R-TN), and Michelle Lujan Grisham (D-NM)—outlined1 a series of legislative principles that they believe would underlie a more appropriate “Best Interest” standard. On December 4, 2015, the group issued2 a statement expressing “strong optimism” that they would introduce a legislative proposal “before Congress breaks for the holidays.” Notwithstanding the forthcoming introduction of such legislation and the likely continuation of this effort when Congress reconvenes in 2016, it is unlikely that legislation affecting the rule will be enacted on a standalone basis. The White House previously issued a Statement of Administration Policy3 threatening to veto a separate piece of legislation that would prohibit the DOL from finalizing its proposed rule until the Securities and Exchange Commission (SEC) issues a final rule setting forth a fiduciary standard for broker-dealers. Given that the White House and DOL have repeatedly emphasized the importance of finalizing the rule, legislation that would affect this result faces opposition from the Administration.
Although legislation that would affect the rule is not likely to be enacted into law on a standalone basis, the ongoing legislative pressure on the DOL will likely require it to carefully consider the multitude of public comments and suggestions received in response to its proposal. Notably, in testimony4 before the Senate on July 21, 2015, Secretary Tom Perez said the DOL is “open to making real changes in the rule to improve it,” an approach that continued throughout four days of DOL-hosted public hearings in August.
In addition to the legislative activity, it is likely that the rule will be subject to litigation once it is finalized.5 However, it is important to note that a final rule would have to be in place before any court would likely consider any legal challenge. Additionally, it remains unknown whether litigation would be effective in stopping or delaying the full implementation of the rule.
1 House Committee on Ways and Means, Bipartisan House Members Outline Legislative Principles to Ensure Retirement Advisors Protect Clients’ Best Interests, dated November 5, 2015, available at http://waysandmeans.house.gov/bipartisan-house-members-outline-legislative-principles-to-ensure-retirement-advisors-protect-clients-best-interests/
2 House Committee on Ways and Means, Bipartisan Lawmakers Finalizing Bill to Ensure Retirement Advisors Protect Clients’ Best Interests, dated December 4, 2015, available at http://waysandmeans.house.gov/bipartisan-lawmakers-finalizing-bill-to-ensure-retirement-advisors-protect-clients-best-interests/
3 Statement of Administration Policy, H.R. 1090 – Retail Investor Protection Act, available at https://www.whitehouse.gov/sites/default/files/omb/legislative/sap/114/saphr1090r_20151026.pdf
4 Testimony of US Secretary of Labor Tom Perez, Before the Employment and Workplace Safety Subcommittee, Senate Committee on Health, Education, Labor and Pensions, delivered on July 21, 2015, available at http://www.dol.gov/_sec/media/congress/20150721_Perez.htm
5 See Comment Letter from the American Council of Life Insurers, dated September 24, 2015, available at http://www.dol.gov/ebsa/pdf/1210-AB32-2-03050.pdf. (“The Department’s late-circulated economic studies are relevant to the proposal’s Regulatory Impact Analysis. The short period to review the economic studies is inadequate for such a complex rulemaking and conflicts with APA rulemaking standards requiring reasonable opportunity for comment, especially concerning regulated industries and large organizations as emphasized in the Guide to Federal Agency Rulemaking. The Department’s deficient process regarding the belated economic studies exposes the initiative to legal challenge under the APA.”)