Fiduciary Rule Repeal Bill Scored by CBO - The Industry Spread

Michael Volpe

After spending a decade in finance, Michael Volpe has been a freelance investigative journalist since 2009. His work has been published locally in the Chicago Reader, Chicago Crusader, Chicago Heights Patch, and New City. Nationally, Volpe's work has appeared in a wide variety of publications including the Washington Examiner, the Daily Caller, Crime Magazine, the Southern Christian Leadership Conference Newsletter, and Counter Punch. Volpe has been recognized by whistleblowers as leading the charge in getting their stories out. His first book Prosecutors Gone Wild was published in October 2012, his second book The Definitive Dossier of PTSD in Whistleblowers was published in February 2013 and his third book Bullied to Death was published in August 2015.

Fiduciary Rule Repeal Bill Scored by CBO

December 13, 2017

The Congressional Budget Office (CBO) has scored a bill which would repeal the controversial fiduciary rule.fiduciary rule

The Protecting Advice for Small Savers (PASS) Act received its CBO scoring, and the CBO believes it will have a small cost which will be eaten up in fees.

“Using information from the SEC [Securities and Exchange Commission], CBO estimates that implementing H.R. 3857 would cost $2 million over the 2018-2022 period for the agency to issue new guidance on the broker dealer standard of conduct and to expand examination and enforcement efforts to review compliance. However, because the SEC is authorized to collect fees sufficient to offset its annual appropriation, CBO estimates that the net effect on discretionary spending would be negligible, assuming appropriation actions consistent with that authority,” the CBO stated.

The fiduciary rule sets a fiduciary standard for any investment advisor dealing with retirement plans.

The rule has become controversial because the fiduciary standard, critics note, is burdensome and, critics argue, will lead to less investment advice on retirement plans.

It’s also controversial because rather than the SEC implementing the rule, it is implemented by the Department of Labor (DOL).

The PASS Act, which was introduced in the House Financial Services Committee by Ann Wagner, a Republican from the State of Georgia, would apply to all investment advisors, not only to retirement accounts, and it would be implemented by the SEC.

But the PASS Act is also likely to be controversial, because it allows for conflicts of interest as long as they are disclosed.

The PASS Act has the following features.

  • Repeals the DOL fiduciary rule
  • Creates a best interest standard for broker-dealers
  • Requires broker-dealers to disclose compensation they receive and any conflict of interest that exists
  • Limits SEC rule making authority under Section 913 of Dodd-Frank
  • Prevents Department of Treasury and DOL from promulgating fiduciary regulations on broker-dealers under The Employee Retirement Income Security Act of 1974 (ERISA)
  • Preempts state laws avoiding a patchwork of standards

Congresswoman Wagner made the following statement when introducing the bill:

“The Department of Labor’s fiduciary rule is already hurting Main Street Americans by eliminating investment choices and raising costs. According to a recent study by the U.S. Chamber of Commerce, low and middle income retirement savings investors have already begun to experience a negative impact on their ability to save and invest for their future as a result of the DOL’s regulatory overreach. The PASS Act will protect these investors by creating a best interest standard for broker-dealers that benefits consumers and protects their access to financial advice.

“America is in the midst of a savings crisis and this legislation will ensure it is easier for families to save and invest, not harder. At the end of the day, every family should have access to affordable investment products and the confidence that their best interest is being served.”

The CBO projects the costs and budget effects for bills; CBO scoring is considered regular order.

After a bill passes out of a committee, it is scored by the CBO before it heads to the full chamber.

The PASS Act now heads to the full house before following a similar process in the Senate.

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