Three prominent Senate Democrats and ardent backers of the Labor Department's fiduciary rule are accusing Labor Secretary Alexander Acosta of talking out of both sides of his mouth.
A letter signed by Sen. Patty Murray, D-WA, Sen. Elizabeth Warren, D-MA, and Sen. Cory Booker, D-NJ, claims recent reports that Acosta has made freezing the fiduciary rule his primary priority is a contradiction from the sworn testimony he gave during his confirmation hearing.
"You were asked during your confirmation hearing about your plans for the conflict of interest rule, and you stated that you would follow the 'executive orders of the President'," the lawmakers wrote.
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But in making a rollback of the fiduciary rule his top priority, as was claimed in a leaked communication first obtained by NAPA-net.org, the lawmakers insinuate that the Labor Secretary is putting the cart before the horse and deciding that the rule needs to be revised or rescinded before the analysis of the rule ordered by President Trump has been completed.
"Instead of meeting with all stakeholders and considering multiple points of view, you appear to have prejudged the outcome of the review your agency was tasked with conducting. In fact, it seems as though you have already arrived at your decision," the letter states.
The senators say that reports of Acosta's intent to freeze the rule this early in his tenure conflicts with his pledge to uphold the law, which he made during his confirmation hearing.
"You no doubt are aware of the steep legal standards the Department must overcome to justify further delaying, substantially revising, or rescinding this rule," Senators Murray, Warren, and Booker wrote. "We urge you to demonstrate your commitment to America's retirement savers and allow the rule and the consumer protections and savings contained therein to take effect next month."
The first phase of the fiduciary rule, which requires advisors and brokers to put investors' best interest first when recommending investments on IRAs and defined contribution plans, is scheduled for implementation June 9.
The Labor Department issued a 60-day delay of the rule in April. But industry opponents of the rule, and Republican lawmakers, have been lobbying Sec. Acosta to delay the June 9 implementation date until the updated economic and legal analysis of the rule is completed.
Whether the Labor Department has the authority to issue another delay of the rule's first implementation date is subject of legal debate under the Administrative Procedure Act.
Bethany Davis Noll, an attorney with the Institute for Policy Integrity at the New York University School of Law, recently told BenefitsPRO that it is not legally inconceivable for Labor to issue another delay before June 9.
But she cautioned that the Department "has a huge burden to overcome if they want to delay this."
A new delay would have to be supported by a new cost benefit analysis. It would most likely be based on the reasoning that industry needs more time to comply with the impartial conduct standards that will take effect on June 9.
Were the agency to make that case, it would contradict language in the first delay, which said regulators found "little basis for concluding that advisors need more time to give advice that is in the retirement investors' best interest" beyond June 9.
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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.
