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 Evidence of the discord between the two agencies is likely to be
seized on by critics of the controversial proposal, proposed by the
Labor Department, which regulates retirement plan advice. The plan
would require brokers to act in clients' best interests when
advising about individual retirement accounts (IRAs), a savings
vehicle for millions of investors.
But the Department, in developing the proposal, rejected numerous
recommendations from the SEC, the U.S. Treasury Department, and
other agencies, wrote Republican Senator Ron Johnson, chairman of
the Senate Homeland Security and Governmental Affairs Committee, in
a 39-page report released on Wednesday.
The Labor Department's plan has been in play for more than five
years. On Jan. 29, the White House's Office of Management and Budget
said it had received the department's final proposed rule. The White
House does not have an exact time frame for implementing the rule, a
spokesman said at the time.
Under the plan, brokers would have to act in clients' best
interests, or as "fiduciaries," when advising about IRAs. Brokers
now must recommend investments that are "suitable," based on factors
such as investors' ages. But they can receive significant fees when
advising clients to "roll over" assets from employer-sponsored
retirement plans into IRAs.
Many Republicans and some Democrats oppose the plan, saying it would
drive up customers' costs and curb commissions. The Securities
Industry and Financial Markets Association and other trade groups
have called for the OMB to conduct a comprehensive analysis of the
rule's potential costs and benefits.
'STOP EMAILING ME'
Part of the Senate panel's report focused on July 31, 2012 emails
between Labor Department economist Keith Bergstresser and SEC
economist Matthew Kozora. They discussed types of improper broker
activity that the rule should measure: conflicts of interest or
impact on investment returns.
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"I hate to break it to you, but you're wrong," Bergstresser wrote to
Kozora, according to the report. "People do not respond to fees or
any other costs, but they do chase returns."
"You keep circling back to the same statements, many or which are
unsupported conjectures on your part," Bergstresser later wrote to
Kozora. "If you have nothing new to bring up, please stop emailing
me about this topic," Bergstresser wrote.
"I am also now utterly confused as to what the purpose of the
proposed DOL rule is then, if not to limit advisor conflicts when
providing retirement advice," Kozora later wrote.
The Labor Department "prioritized the expeditious completion of the
rulemaking process at the expense of thoughtful deliberation," the
report said. Senator Johnson also faced "continuous obstruction"
from the Department, which did not respond to requests for details
about its White House communications, the report said.
Individual retirement accounts accounted for $7.3 trillion, or 30
percent, of U.S. retirement assets in September, according to trade
group Investment Company Institute.
(Reporting by Suzanne Barlyn)
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