The House Financial Services Committee on Thursday passed a bill by Rep. Ann Wagner, R-Mo., to repeal the U.S. Department of Labor’s controversial fiduciary rule.

The bill, which passed 34-26, creates a best-interest standard for brokers, gives the Securities and Exchange Commission enforcement authority over the standard and encourages state insurance commissioners to adopt a similar standard for the sale of annuities.

The bill, H.R. 3857, the Protecting Advice for Small Savers Act of 2017 (PASS), “provides a path forward by appropriately underscoring the lead role of the SEC as the nation’s primary securities regulator,” says Kenneth E. Bentsen Jr., CEO and chairman of the Securities Industry and Financial Markets Association (SIFMA).

“We firmly believe that this approach will provide a number of significant regulatory efficiency and investor protection benefits, thus relieving America’s retirement savers from the burdens that have arisen as a consequence of the DOL’s misguided rule,” Bentsen says.

ACLI President and CEO Dirk Kempthorne is urging the full House to pass the bill. “The PASS Act represents an important step toward efficient and effective uniform standard of conduct regulation that would ensure Americans receive financial advice that is in their best interest while also maintaining access to the financial products and services they want and need,” Kempthorne says.

The Wagner bill says that an investment recommendation would satisfy the best interest standard if it reflected “reasonable diligence” on the part of the broker, the definition of which would be modeled on the existing definition from the Financial Industry Regulatory Authority. Finra requires that brokers use reasonable “care, skill and prudence” based on a customer’s individual investment needs.

The bill would institute new disclosure requirements on brokers based on their compensation, type of services issued to investors and potential conflicts.

The bill says commission-based compensation and recommendations on proprietary investment products do not by themselves violate the best interest standard. Under the fiduciary rule, each circumstance would warrant a prohibited transaction and require use of the Best Interest Contract Exemption.

It also says that brokers would not be required to recommend the least expensive investment products.

While it sets reasonable diligence as the standard for making an investment recommendation, the proposed law also states that brokers would not be required to “analyze all possible securities, other products, or investment strategies before making a recommendation.” That language stands in stark contrast to language in the DOL fiduciary rule, which requires brokers and advisors to execute a cost comparison analysis when recommending rolling over 401(k) assets to IRAs.

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