Former Vice President Joe Biden. (Photo: Ryan Collerd/Bloomberg)
While the Department of Labor is "rapidly" moving to finalize before year-end — and perhaps before the election — its fiduciary prohibited transaction exemption to align with the Securities and Exchange Commission's Regulation Best Interest, a Biden administration will likely seek to overturn both rules, according to Morningstar analysts.
Jasmine Sethi, associate director of policy research, noted Wednesday at Morningstar's annual conference, held online, that Labor's rule "has been criticized from all sides."
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The problem, according to Sethi, is that "the proposal is vague…particularly with rollovers." The plan "brought back the five part test but reinterpreted it to cover rollovers. It does not include all rollovers, just those that meet the five-part test. The tricky prong is the regular basis prong."
Aron Szapiro, policy research head at Morningstar, predicted that SEC Chairman Jay Clayton would leave "in early 2021," and if former Vice President Joe Biden won the White House, the new SEC chair would likely withdraw Reg BI.
If President Donald Trump is re-elected, he will "maintain the status quo in terms of regulation," Szapiro said. If Biden wins, there will be "support for enhancing standards of conduct above Reg BI," which could be done through a Democratic chair and a 3-2 vote at the commission.
Or Reg BI changes could be achieved by amending the Dodd-Frank Act "to make clear that standards of conduct should be uniform," Szapiro said. "This is a real live issue with the election."
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Melanie Waddell
Melanie is senior editor and Washington bureau chief of ThinkAdvisor. Her ThinkAdvisor coverage zeros in on how politics, policy, legislation and regulations affect the investment advisory space. Melanie’s coverage has been cited in various lawmakers’ reports, letters and bills, and in the Labor Department’s fiduciary rule in 2024. In 2019, Melanie received an Honorable Mention, Range of Work by a Single Author award from @Folio. Melanie joined Investment Advisor magazine as New York bureau chief in 2000. She has been a columnist since 2002. She started her career in Washington in 1994, covering financial issues at American Banker. Since 1997, Melanie has been covering investment-related issues, holding senior editorial positions at American Banker publications in both Washington and New York. Briefly, she was content chief for Internet Capital Group’s EFinancialWorld in New York and wrote freelance articles for Institutional Investor. Melanie holds a bachelor’s degree in English from Towson University. She interned at The Baltimore Sun and its suburban edition.
