House Committee Passes Bill Repealing DOL Fiduciary Rule

On October 12th, the US House of Representatives Financial Services Committee passed the “Pass Act of 2017.” If enacted this bill would repeal the Department of Labor (DOL) fiduciary rule and change the jurisdiction of fiduciary duty regulation to the Securities and Exchange Commission (SEC). Can this bill pass the full House and Senate? Financial Services Committee passed H.R. 3857, the Protecting Adviser for Small Savers (PASS) Act of 2017. If enacted this bill would repeal the Department of Labor (DOL) fiduciary rule and change the jurisdiction of fiduciary duty regulation to the Securities and Exchange Commission (SEC).

All 34 republicans voted for the bill and all 26 democrats voted against the bill. The bill was introduced by Representative Ann Wagner (R-MO). It repeals the DOL fiduciary rule and establishes various best-interest standards for broker-dealers who make recommendations to retail customers under the Securities Exchange Act.

Read more: DOL Fiduciary Rule and HSAs and DOL Actions in 2017

About the PASS Act:

• Repeals the Department of Labor (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 U.S. Securities and Exchange Commission (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

Chance and timing of enactment

Now that the bill has passed out of the House Financial Services Committee, it will advance to the full House for a vote. However, there are two large impediments to enactment: the Congressional Calendar and the Senate.

The House is only in session for another 26 days and have higher priorities to address in that time that includes the debt limit, government funding, tax reform and funding essential programs. The Pass Act may not fit into the calendar. In that case, it would need to be introduced and voted on by the Financial Services Committee in the next Congress before once again advancing to the full House for a vote next year.

Even if the House does pass the bill, the Senate is more problematic. In the House, the Republicans hold a comfortable majority; however, it is far less likely to pass in the Senate where the Republicans only hold a two vote majority and all Democrats are expected to vote against this bill, just as they did in the Committee vote.