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.