CHOICE Act Targets Fiduciary Rule, Dodd-Frank Rollback

Passage of the CHOICE Act by the House Financial Services Committee could signal a further blow to conflict of interest regulations adopted by the Obama administration. 

By John Manganaro | May 05, 2017
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The Financial Services Committee has approved the CHOICE Act for consideration by the full House of Representatives, a move considered by some to be the first real step towards Congressional repeal of Dodd-Frank regulations and the Department of Labor (DOL) fiduciary rule.

The legislation is sweeping and would undue or replace much of the Dodd-Frank Wall Street reforms adopted by Democrats when they held significant majorities in the wake of the 2008-09 financial crisis.

Interestingly, in the executive summary of the CHOICE Act published by the Republican members on the Financial Services Committee, there is only one very brief, single-bullet-point mention of the DOL fiduciary rule—and this bullet point comes at the very end of the document. It is probably too much to read into that symbolic detail, but the CHOICE Act’s impact on the DOL fiduciary rule, and even on particular elements of Dodd-Frank, could potentially be renegotiated by the full House and Senate.

In the actual text of the legislation there is more detail about how the fiduciary rule will be treated. The CHOICE Act seeks to “repeal the DOL’s fiduciary rule and require the Securities and Exchange Commission (SEC), before promulgating any such rule, to report to the House Committee on Financial Services and the Senate Committee on Banking, Housing, and Urban Affairs on whether retail customers are being harmed because broker/dealers are held to a different standard of conduct from that of investment advisers; alternative remedies will reduce any confusion and harm to retail investors due to the different standard of conduct; adoption of a uniform fiduciary standard would adversely impact the commissions of broker/dealers or the availability of certain financial products and transactions; and the adoption of a uniform fiduciary standard would adversely impact retail investors’ access to personalized and cost-effective investment advice or recommendations about securities.”

Additionally, the SEC’s chief economist is “required to support any conclusion in the report with economic analysis.” Finally, it requires the DOL, “if it promulgates a fiduciary rule under ERISA, to substantially conform it to the SEC’s standards.”

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