The Department of Labor’s latest attempt to impose a fiduciary standard for advisors, which consumer advocates see as much weaker than previous proposals, triggered one senator’s extreme ire on Monday.
Senator Patty Murray, D-Wash., ranking member of the Senate Health, Education, Labor, and Pensions (HELP) Committee, sent a statement Monday that read in part, “After suing the Department of Labor to strike down the Obama-era fiduciary standard, Scalia took over the Department as Secretary and worked on the new, weaker proposal.”
“This inadequate proposal will leave financial advisors free to put their interests ahead of their clients,” Murray added. “We need a strong fiduciary rule to protect people’s hard-earned savings—and we had one before Scalia sued the Department of Labor to strike it down. Then he took over the Department of Labor and replaced it with this subpar proposal. Instead of moving ahead with this proposal that will leave people across the country vulnerable, the Department should go back to the drawing board and come up with one that actually protects them and meets the high standard that Congress mandated in ERISA.”
Secretary Scalia’s involvement
In 2018, now-Secretary Eugene Scalia, son of the late Supreme Court Justice Antonin Scalia, sued the Department of Labor on behalf of the Chamber of Commerce and other financial services trade groups.
They challenged the Obama-era fiduciary standard which required financial advisors to put their clients’ financial security ahead of their own interests.
“Despite previous court rulings upholding the Obama-era standard, the Trump Administration chose not to defend it in court after the Fifth Circuit ruled against it, effectively killing the rule,” Murray noted. “Even though Secretary Scalia played a key role in striking down the rule, and once wrote an op-ed referring to it as a regulatory ‘Godzilla,’ Secretary Scalia did not recuse himself in the Department’s work on a new standard.”
The new proposal cedes the Department of Labor’s central role in protecting retirement savers to the Securities and Exchange Commission (SEC), she argued, and demonstrates” a disregard for the intentional choices that Congress made over 40 years ago when it enacted ERISA and explicitly rejected giving SEC jurisdiction as Congress wanted to ensure the highest levels of protections for retirement savers in adopting a fiduciary standard of care because of the special nature and purposes of employee benefit plans.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
