A House panel approved legislation Wednesday meant to stop a major new Obama administration rule to crack down on conflicts of interest in retirement investment advising.
The House Financial Services Committee voted in favor of the bill, sponsored by Rep. Ann Wagner, R-Mo., to prevent the Department of Labor from finalizing the rule before the more industry-friendly Securities and Exchange Commission writes its own rule, a requirement that effectively would kill the new rule.
The vote was 35-34, mostly on a party-line vote with Republicans voting for it. Rep. David Scott of Georgia was the lone Democrat to vote in favor. The committee also approved financial industry-backed bills aimed at overhauling the Consumer Financial Protection Bureau by giving it a dedicated inspector general and replacing its single director with a five-member commission.
The Labor Department rule, an Obama administration priority, would require more retirement advisers to act in their clients’ best interests. Currently, many brokers, insurance agents and other advisers who help clients set up tax-privileged retirement accounts are not held to that legal standard.
The Obama administration has warned that conflicts of interests by some advisers currently costs savers billions of dollars annually, because advisers steer clients into high-fee financial products in return for kickbacks from the sellers of those products.
Wagner suggested that the Labor Department is “clearly on a deadline to get this rule out the door” to have it go into effect before President Obama leaves office.
The financial services industry has resisted that timeline and has argued that the rule would result in many advisers being unable to provide advice to individuals and small businesses, limiting their options.
Nevertheless, both sides anticipate that the Labor Department will finalize a rule with only small changes later this year or next.
Wagner’s bill provides a vehicle for ending the process, but it would face opposition from Senate Democrats and Obama, making it only a remote prospect.
Nevertheless, the mark-up of the bill Wednesday showed the level of concern about the rule on both sides of the aisle.
Rep. Gwen Moore, D-Wis., acknowledged that she had concerns about the rule that she hoped to have addressed. She had circulated a letter, signed by 96 House Democrats, outlining those worries to the Labor Department.
But Moore also indicated her willingness to see the department finalize a rule: “Whatever is the point now in stopping the rulemaking in its tracks?” she asked.
Liberal Democrats in the House and Senate have fought hard for the rule, and have framed the issue as a battle between the middle class and Wall Street.
“We should not force hard-working Americans to wait any longer for retirement advice that is in their best interest,” said Rep. Maxine Waters of California, the top Democrat on the panel.
The rule, a major undertaking and the subject of intense lobbying by Obama administration officials and the industry, was also the subject of a hearing before the House Ways and Means Committee Wednesday.
In that hearing, Democrat John Larson of Connecticut suggested an openness to legislation. “We’re closer on this than we are farther apart,” he said. “It’s just a matter of doing the right thing and getting this done right. And if it requires legislation, so be it.”
