Sen. Ron Johnson, R-Wis., is pressuring the Department of Labor to back off its controversial fiduciary rule.
Johnson sent a Nov. 22 letter to Secretary of Labor Thomas Perez asking the department to “cease its implementation” of the regulation, which is slated to begin taking effect April 10, 2017.
The DOL has not responded to the letter, and did not return a message seeking comment. It is unclear what the department could do since the rule has been published in the Federal Register.
But Johnson noted that Republicans retained control of Congress and President-elect Donald Trump won the White House. That creates a “substantial likelihood” that the DOL rule will be killed, Johnson wrote.
The DOL rule holds anyone working with retirement funds to a fiduciary standard. In order to receive commissions, advisors must commit to act in the “best interest” of clients and assume liability.
Johnson released a study in February claiming the rule will increase costs for small business investment advisors, increase uncertainty in the markets and decrease access to advice for small savers.
Johnson chairs the Senate Committee on Homeland Security and Governmental Affairs.
“I hope the Labor Department will acknowledge the reality of the situation and avoid imposing unnecessary costs and burdens in further implementation of a regulation that will very likely be rescinded,” the senator wrote.
Trump can direct his secretary of labor to delay the rule. Otherwise, opponents have three ways to kill the rule:
• Legislation: House Republicans have Finance Committee-approved legislation ready to go, gutting both the fiduciary rule and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
Democrats can still block legislation in the Senate by filibustering. Given how active Sens. Elizabeth Warren, D-Mass., and Bernie Sanders, I-Vt., are on financial protection issues, the legislation route could be a tough one.
• Regulation: The new administration could adopt new rules that reverse the impending fiduciary rules. But to do so means following an arduous process of notification and public hearings and publication. And courts have ruled against similar efforts in the past.
• The courts: Opponents could wait and see if the courts strike down the fiduciary rule, which would enable the new administration to expend political capital elsewhere.
Four cases are ongoing in federal district courts in four different states. Judges have ruled in favor of the DOL in two court decisions handed down to date.
A third case brought by the U.S. Chamber of Commerce was heard Nov. 17 in Dallas, while a challenge by Thrivent Financial has a March 2 court date in St. Paul.
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected].
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