With the Trump administration having failed to stop former President Barack Obama’s conflict-of-interest rule for investment advisers from going into effect, House Republicans are looking to legislation to undo the rule.
Two Republicans on committees with oversight of the Labor Department introduced legislation Thursday to undo the agency’s fiduciary rule, a major regulation that is supposed to begin going into effect Friday and would reshape the rules for retirement advice.
Phil Roe, a member of the House Education and Workforce Committee, said on introducing the legislation that the Labor Department rule “would make it harder for low- and middle-income families to save for retirement.”
“The Obama administration made a reckless, unnecessary trade-off between strong protections for retirement savers and access to affordable retirement advice,” the Tennessee Republican said.
The rule would require that all advisers and brokers who serve clients with tax-privileged retirement accounts, such as Individual Retirement Accounts, act in their clients’ best interests.
The Obama administration wrote the rule on the basis that it is necessary to protect savers, especially people rolling 401(k)s over into IRAs, from advisers with conflicts of interest. The concern was that some brokers steer clients into inappropriate high-fee investment products for which the brokers receive kickbacks.
Republicans, however, have argued that the rule would raise litigation costs for advisers, leading them to drop middle-income clients and small businesses.
After a major lobbying battle, the Obama administration put the rule in motion. After President Trump took office, some congressional Republicans saw a chance to halt the rule But newly appointed Labor Secretary Alexander Acosta said in May that under administrative law, he could not stop the rule from going into effect.
That decision disappointed congressional Republicans. Acosta defended it Wednesday in congressional testimony, saying that the rulemaking process is “cumbersome” but necessary. “No one in government should be able to snap their fingers and undo something,” he told a budget committee panel, according to the trade publication Pensions & Investments.
Republicans and the investment industry have since been weighing their options for stopping the rule.
The bill introduced Tuesday by Roe and Rep. Peter Roskam of Illinois, the chairman of the subcommittee on tax policy, would overturn the rule and amend the underlying retirement and tax laws establishing which kinds of financial advice involve a fiduciary relationship between advisers and clients.
Advocates of a more stringent fiduciary rule have criticized past Republican proposals for alternatives to the labor rule, saying that they would fall short of establishing a legal standard that advisers act in clients’ best interests.
On Thursday, House Republicans are also set to pass sweeping a sweeping regulatory overhaul, the Financial Choice Act, that also would stop the fiduciary rule. That legislative package is not expected to advance in the Senate, however.
