The Employee Benefits Security Administration (EBSA) of the U.S. Department of Labor announced today that it will hold a public hearing on its controversial fiduciary proposal after receiving “considerable interest.”

Sen. Elizabeth Warren (D-MA) called for a hearing into the proposal on August 5, admonishing the agency for rushing the rule. “Financial advisers’ conflicts of interest cost families an estimated $17 billion every year. My office has led a series of investigations on conflicts of interest in the annuity industry that showed how providers offer agents lavish kickbacks that can compromise retirees’ savings,” Warren said.

The proposal, designed to harmonize DOL policies with the Securities and Exchange Commission’s Regulation Best Interest, will still allow advisors to continue receiving compensation from third parties for the sale of investment and insurance products.

The hearing is scheduled virtually for September 3 (and if necessary September 4) at 9am and is being held “to consider issues attendant to adopting a proposed prohibited transaction exemption on Improving Investment Advice for Workers and Retirees,” EBSA said in an announcement.

In announcing the hearing, EBSA noted that, “since publication in the Federal Register, there has been considerable interest expressed regarding the proposed prohibited transaction exemption, as well as several public comments requesting a hearing.”

To effectively respond to that interest, EBSA said it “has decided to hold a public hearing on this proposed prohibited transaction exemption to provide commenters an opportunity to present material factual issues that cannot be fully explored through written submission.”

The requests to testify are likely to be brisk, considering that the proposal has elicited contentious comments from across the investing universe. Consumer and pro-fiduciary groups have argued that the proposal leaves retirement investors exposed to conflicts and hidden fees.

In contrast, broker and insurance trade groups have complained to EBSA that the regulation would still under certain very limited circumstances, mandate that brokers and advisors act as fiduciaries when making investment recommendations, effectively reinstating the Obama-era DOL fiduciary rule.

For example, Morgan Stanley, which owns Merrill Lynch Pierce Fenner & Smith, argued that firms shouldn’t even be required to provide “a written acknowledgement” that they and their reps are acting as fiduciaries when they deliver investment advice to ERISA plan participants.

“Large, complex financial institutions such as Merrill offer different products and services and our advisors interact with their clients and prospects in diverse ways. In our view, it would not be reasonably practicable on a case by case basis (or even on a service by service basis) to make that factual determination of fiduciary status. To address the practical issue, we could essentially be forced to comply with the exemption conditions in situations where we are not acting as a fiduciary, but there is some risk that fiduciary status could attach to a particular interaction,” Morgan Stanley Managing Director Patricia Anne Kuhn said in her comment letter.

The proposed rule will dictate the fiduciary level of investment advice received by the approximately 102 million workers who participate in the 660,000 defined contribution plans covered by ERISA that the DOL oversees.

Those who want to testify at the hearing have just three days to apply to do so. “Requests to testify at the hearing on the proposed exemption must be submitted to EBSA on or before Aug. 28, 2020,” the agency said.

Testimony will be limited to individuals or parties who have already submitted a comment or hearing request on the proposed exemption before the close of the comment period, EBSA said.

Outlines of remarks submitted by potential witnesses “should present material factual issues and demonstrate that the proposed testimony is both germane to factual issues needing exploration at the hearing that could not have been submitted in writing, and not duplicative of arguments and factual material previously included in the requestor’s comment letter,” EBSA said.

The proposal and notice of hearing are available here.