By a vote of 56 to 41, the Senate passed a resolution of disapproval (H.J. Res. 88) to prevent the Department of Labor’s implementation of the final rule, “Definition of the Term ‘Fiduciary’; Conflict of Interest Rule – Retirement Investment Advice.” The U.S. House of Representatives voted to pass the rule on April 28, 2016, which now awaits President Obama’s signature.
Lofchie Comment: The President will most likely veto this bill. It is unlikely lawmakers will have the votes to override the veto. Certainly, the Department of Labor had the legal authority to adopt the rule (subject to any potential procedural change). It should go forward as adopted, notwithstanding (i) serious policy objections to the rule and (ii) the fact that a Congressional majority considers it to be flawed. That said, this “victory” of rulemaking exemplifies the wrong way to conduct regulatory policy.
In practice, the DOL’s fiduciary rule covers a lot of ground. If the DOL had adopted a less burdensome rule, then a majority of Congress might have considered it to be workable. In an even better scenario, the DOL might have agreed to collaborate with the SEC on a rule that would be applicable to all retail investors (which could have been the most rational solution of all from a policy perspective). Proponents of the DOL rule would have viewed such compromise as flawed. Nevertheless, any such compromise would represent a better way to conduct regulatory policy; i.e., it would reflect an attempt to achieve a consensus.