The business community is steeling for battle against the Obama administration’s proposed rule for financial advisers, and could mount a court challenge if congressional efforts to block the regulations fall short.
Brad Campbell, an attorney at Drinker Biddle & Reath, left the door open to taking the administration to court if the Labor Department proposal is enacted as drafted.
{mosads}”It’s premature to talk about what might happen based on a final rule because the goal is to get to a final rule that works — and not one that everyone wants to sue,” said Campbell, a former top DOL official, during a conference call with reporters organized by the U.S. Chamber of Commerce.
The group and other financial institutions are lobbying heavily against the proposed rule that would alter disclosure requirements for financial advisers, implementing what’s known in the industry as a “fiduciary standard.”
DOL is seeking comment from the industry and a hearing is expected in August.
“The Department of Labor is going to have to make changes regardless of any political questions,” Campbell said.
He released a report on Tuesday slamming the proposal as hurting small businesses, arguing that 9 million households supported by small businesses will either completely lose access to employer-sponsored retirement plans or face dramatically higher fees under the proposed regulations.
President Obama and supporters argue that the fiduciary regulations are needed so that consumers know how their financial advisers are getting paid, and if they earn commission payments from financial institutions for making a sale to consumers.
But the industry argues that the new regulations would radically change the industry and raise the cost of financial advice for low- and moderate-income Americans.
They argue that the new regulations would also create compliance headaches and market confusion, requiring separate financial advisers for long-term savings plans and retirement plans.
DOL officials failed to get a similar proposal approved in 2010.
But it’s unclear whether the industry will use Congress to seek a legislative fix or whether they will continue to lobby DOL officials.
Rep. Ann Wagner (R-Mo.) introduced legislation that would give lawmakers more oversight in the rule-making process, but it’s unclear whether Obama would veto the legislation. It’s also unclear whether such a bill could pass in time to delay a final rule from being proposed, which is on course for early next year.
“There are a number of moderate Democrats interested in this issue,” she said. “What we’ve heard from the vast majority of our members is that the [proposed rule is] almost impossible to work,” said Alice Joe, a managing director at the chamber.
“We’re only about six or seven weeks into the beginning of this,” Campbell said. “The Department of Labor has had four years to write these rules and we’re getting about 90 days to evaluate the most significant rewrite of these laws in the last 40 years.”