Department of Labor ethics attorneys have given Secretary Eugene Scalia approval to participate in future rule-making regarding a fiduciary standard.
Mr. Scalia was sworn in as labor secretary late last month and the agency is expected to issue a new fiduciary rule later this year.
Previously, he was a partner at Gibson Dunn & Crutcher and was part of a team representing the U.S. Chamber of Commerce, the Securities Industry and Financial Markets Association and other associations in successful challenges to the fiduciary rule, including during oral arguments before the 5th U.S. Circuit Court of Appeals in New Orleans.
Due to his private sector work, with respect to the fiduciary rule, Mr. Scalia said at his Senate hearing in September that we would "seek guidance from the designated agency ethics official at the Department of Labor regarding what my ability to participate would be."
The career ethics attorneys at the Labor Department "determined that neither the applicable ethics rules nor the Trump administration's ethics pledge required recusal by the secretary because the new rule-making is not a 'particular matter involving specific parties' and litigation related to a prior rule (that) the secretary handled while in private practice has ended," Labor Department Solicitor Kate O'Scannlain said in a statement.
She added that the U.S. Office of Government Ethics concurred with the analysis.
Dennis Kelleher, president and CEO of watchdog group Better Markets, disagreed with ethics attorneys' opinion. "Whether or not that is technically correct as a legal matter, it is shockingly bad policy and practice," Mr. Kelleher said in a news release. "At the very least, it has the appearance of impropriety, something that ethics rules are also meant to prevent."
In June, the Securities and Exchange Commission adopted a best-interest standard that aims to compel brokers to put clients' financial interests ahead of their own and requires them to mitigate financial conflicts.
During his Senate testimony, Mr. Scalia said that he would not cede the issue to the SEC. "The DOL is focused on employment retirement savings and one of the concerns that was raised by the fiduciary rule was that they were treading on the SEC's jurisdiction," Mr. Scalia said. "So I think part of what's necessary in a government is making sure that there's the proper balance between the regulatory authorities and I would want to, if I'm confirmed, work with the SEC if necessary to strike that balance correctly."
