A bill approved Wednesday by the House Financial Services Committee slows down efforts by the Department of Labor to increase financial advisors’ accountability to those with retirement plans such as 401(k)s or IRAs.
The legislation makes the Labor Department rule that enhances the fiduciary duty of advisers to those planning for retirement contingent on the Securities and Exchange Commission (SEC) issuing a rule that covers similar ground, according to Bloomberg Businessweek.
The Labor Department’s initial proposal would force brokerages to lose millions of accounts, according to brokers.
“Neither the SEC nor DOL have considered the serious, adverse consequences that would befall retail investors if these rules move forward,” Representative Ann Wagner (R-Mo.), the bill’s author, told Bloomberg.
The bill would have to pass both the House and the Senate and also get approval from the president, but so far there is no comparable measure working its way through the Senate, according to Wagner. Were it to become law, Wagner’s bill would prevent the Labor Department from issuing its standard until 60 days after the SEC issues its rule.
A study conducted on behalf of the SEC in 2011 found that most consumers don’t recognize the distinction between brokers and advisors, who are bound by different sets of standards. The study recommended that anyone who provides personalized investment advice to retail clients should have to follow a common fiduciary standard.
Even though the SEC has been working on such a plan for nearly three years, its commissioner said it would not be finished in 2013 as originally expected, according to Bloomberg.
Written by Alyssa Gerace