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House Committee Attempts to Stop Fiduciary Rule in Dodd-Frank Reform Bill

The House Financial Services Committee is meeting today to debate, mark up, and vote on legislation that includes provisions to repeal the Department of Labor’s fiduciary rule which redefines the fiduciary standard as it pertains to retirement investment advice. The final version of the rule, which requires advisers to act in the best interests of their clients, was released in April.

In the latest attempt by Republican lawmakers to kill the controversial rule, Committee chairman Jeb Hensarling (R-TX) introduced H.R. 5983, the Financial CHOICE Act, which stands for Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs.

The bill, which is the Republican alternative to the Dodd-Frank Act, seeks to “end taxpayer-funded bailouts of large financial institutions, relieve banks that elect to be strongly capitalized from growth-strangling regulation, impose tougher penalties on those who commit financial fraud, and demand greater accountability from Washington regulators.”

Also in the 500-page bill is a provision that seeks to incorporate more than two dozen Committee- or House-passed capital formation bills, including H.R. 1090, the Retail Investor Protection Act, that passed the House last October in a 246-184 vote.

Introduced by Representative Ann Wagner (R-MO), the Retail Investor Protection Act attempted to repeal the fiduciary rule and restrict the DOL from promulgating similar regulations until after the SEC issued its own fiduciary rule. However, before the SEC would be permitted to issue its final rule, it must first engage in a complete analysis of the rule’s impacts, the availability of retirement product, and access to retirement advice for retail investors.

“Since Democrats passed Dodd-Frank, Americans on Main Street have been struggling with stagnant wages, struggling to get small business loans, and struggling to save for their future,” said Rep. Hensarling. “House Republicans have a better way forward. [The bill] ends taxpayer-funded bailouts once and for all. It stops the cronyism that allows the powerful and well-connected to game our system. It lifts bureaucratic red tape—intended for big banks on Wall Street—off of community banks on Main Street. It requires banks to be well capitalized to prevent another financial crisis and puts in place the toughest penalties in history to protect consumers from fraud and deception, and it will help grow the economy for all Americans—not just those at the top.”

The legislation also wants to put in place cost-benefit analysis requirements for all financial regulators. Specifically, when proposing a rule, regulators must include an assessment of the rule’s need and conduct a rigorous cost-benefit analysis of its quantitative and qualitative impacts. Regulators must allow at least 90 days for notice and comment on a proposed rule and publicly release the data underlying their analyses. If the rule’s costs are determined to outweigh its benefits, the regulators will be prohibited from finalizing the rule absent an express authorization from Congress.

Democrat opponents of the Financial Choice Act have made strong statements against the proposed legislation, with Senator Elizabeth Warren (D-MA) calling it “a wet kiss for Wall Street.” Senator Dick Durbin (D-IL), the namesake of the Dodd-Frank amendment that limits debit card swipe fees – which is also on the chopping block should the bill pass, said the bill is “the largest gift to the banking industry since the big bank bailout of 2008.”

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