Sen. Elizabeth Warren, D-Mass., cautioned Labor Secretary Eugene Scalia against issuing a "weak" fiduciary standard as the Department of Labor readies its proposed rule.
In a letter sent Wednesday, Ms. Warren, a presidential candidate and member of the Senate Health, Education, Labor, and Pensions Committee, said she's concerned the Labor Department might "simply copy the wholly inadequate standards of conduct framework" developed by the Securities and Exchange Commission under its best-interest standard, which was finalized in June.
Prior to taking the helm at the Labor Department in late September, Mr. Scalia was a partner at Gibson Dunn & Crutcher. He was part of a Gibson Dunn 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. The court vacated the Obama-era rule last year and the Trump administration did not appeal.
In October, department ethics attorneys gave Mr. Scalia approval to participate in future rule-making regarding a fiduciary standard, which is expected in the coming weeks or months.
The SEC's best-interest standard, known as Reg BI, aims to compel brokers to put clients' financial interests ahead of their own and requires them to mitigate financial conflicts. But critics of the regulation, including Ms. Warren, say it doesn't go far enough to protect American workers.
In her letter, Ms. Warren said it would be a "costly mistake" for the Labor Department to issue something similar to Reg BI. "Those standards not only allow broker-dealers to give clients advice that is not in their best interest, but significantly water down the longstanding fiduciary standard that has protected the clients of the investment advisers for decades," Ms. Warren wrote of Reg BI.
Ms. Warren asked Mr. Scalia to answer a series of questions — including "How, if at all, are you planning to consider Reg BI in developing a new DOL rule?" and "Will the DOL conduct any new studies or analyses about the effects of conflicts of interest on retirement savers in support of its proposal?" — by Dec. 18.
A Labor Department spokesman could not immediately be reached for comment.
