SEC Commissioner Daniel M. Gallagher isn’t conceding any ground in his opposition to the Labor Department’s “conflict of interest” proposal.
In a comment letter to Labor Secretary Thomas E. Perez, Securities and Exchange Commission member Daniel M. Gallagher urged the department to scrap its proposed fiduciary rule, claiming that its’ implementation would “harm investors” and likely drive many commission-based broker-dealers out of the market altogether.
In the July 21 letter, Gallagher said the rule proves “that the nanny-state is alive and well,” and said that, with this rule, the DOL is asserting that the government is better-equipped than investors are to determine what kinds of advisors and fee structures should be used when investing retirement savings.
“In doing so, it has ignored the benefits to investors of a disclosure-based approach to mitigating potential conflicts of interest,” Gallagher wrote, referring to the DOL. “Investors benefit from choice: choice of products, choice in advice providers, and choice in making decisions for themselves.”
Calling the implementation of the fiduciary rule a “fait accompli” at this point, Gallagher said that the DOL proposal makes it clear that any regulation would supersede the SEC’s rule-making authority. He challenged Secretary Perez’s prior claims that the DOL worked closely with SEC Chair Mary Jo White in developing the rule proposal; Gallagher added that he was not involved in any part of the decision-making process.
This is not the first time that Gallagher has gone on record strongly opposing the DOL’s proposal, nor is it the first time he has questioned how closely Labor and the SEC worked together in the development of the rule. Earlier this year, he called the proposal a “runaway train” and said the White House memo leaked in January 2015 outlining a framework for the regulation was “thinly veiled propaganda designed to generate support for a widely unpopular rulemaking.”
It appears his opinions on the rule have changed little since then. In the July letter, Gallagher also proposes another “disclosure-based” way the DOL could have regulated retirement advice, suggesting a joint rule from the DOL and SEC that would have required disclosures at the point of sale, without creating new hurdles and barriers between advisors and clients.
“Before rolling out another draconian proposal, the DOL could — and should have — engaged the SEC in a dialogue about fee disclosure,” Gallagher wrote. “DOL should scrap the Fiduciary Proposal and start working in a meaningful way with the [SEC] to address the DOL’s concerns about broker fees for retirement accounts.”
