Republican lawmakers in both chambers of Congress are making formal requests of the Department of Labor for information into the rulemaking process behind the agency’s conflict-of-interest, or fiduciary, rule.

Beyond echoing Wall Street’s argument against the rule — that a new fiduciary standard would price low and moderate earners out of the financial services market — the lawmakers are also questioning the DOL’s authority in making the rule, arguing it is the Securities and Exchange Commission’s jurisdiction.

Rep. John Kline, R-Minnesota, chair of the Committee on Education and the Workforce, and Rep. Phil Roe, R-Tennessee, chair of the Subcommittee on Health, Employment, Labor and Pensions, are requesting documents from the DOL proving the agency adequately coordinated with the SEC during the rule making process.

“It is clear coordination between SEC and DOL is vital to ensure a functioning regulatory framework; it is unfortunately far less clear that such coordination is occurring,” the congressmen wrote to DOL Secretary Thomas Perez, requesting the documentation be provided by March 18.

In their letter, Kline and Roe cite remarks made by SEC Commissioner Daniel Gallagher, who has been publicly critical of the proposed rule.

Gallagher, a Republican and Obama appointee, has said the DOL never formally engaged him.

“Despite public reports of close coordination between the DOL and SEC staff, I believe this coordination has been nothing more than a ‘check the box’ exercise by the DOL designed to legitimize the runaway train that is their fiduciary rulemaking,” Gallagher said in a speech days before President Obama announced his support for the rule at the AARP headquarters in Washington, D.C.

“I have not seen the (DOL’s) re-proposal,” added Gallagher. “And given the SEC’s comprehensive oversight authority with respect to the investment advisers and broker-dealers who would be impacted by it, you might find that curious.”

In their letter to Perez, Kline and Roe say Gallagher’s perspective is inconsistent with public pronouncements from the DOL, namely from Assistant Secretary Phyllis Borzi, who in 2011 testified before the Health, Employment, Labor and Pensions subcommittee that DOL and SEC were “actively consulting” with one another.

The congressmen are asking the DOL to provide documentation of all communications with the SEC regarding the rulemaking process since 2011.

“The public has been assured repeatedly that close consultation between these two agencies was underway to avoid any regulatory confusion and inconsistencies,” Kline said. “However, recent statements by a member of the SEC raise serious doubts about whether meaningful consultation has taken place. This rulemaking will affect the retirement security of millions of Americans, and I hope the department has done more than simply pay lip service to good government on this very important issue.”

In early February, weeks before Obama’s speech at the AARP, Sen. Ron Johnson, R-Wisconsin, chair of the Committee on Homeland Security and Government affairs, also wrote to Secretary Perez, requesting the same documentation regarding communications with the SEC since 2010.

Johnson also asked for an explanation as to how a new rule would not adversely affect lower-income investors, among other things, and set a Feb. 19 deadline for doing so. Repeated calls to both Johnson’s office and the DOL this week to determine whether the deadline had been met were not returned.

And in a letter to the director of the Office of Management and Budget this week, Senator John Boozman, R-Arkansas and Rep. Ander Crenshaw, R-Florida, voiced concerns that the DOL’s new rule could conflict with an expected new fiduciary standard from the SEC.

“For that reason, we believe the SEC should move first in any rulemaking in order to address issues of investor harm and confusion surrounding different standards of care,” they said.

At the first Investor Advisory Committee meeting of the year in February, SEC Chair Mary Jo White said the agency will consider whether it should “subject broker-dealers to a fiduciary standard” this year.

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Nick Thornton

Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.