Each election year, pundits take aim at the financial industry and representatives from both sides of the aisle tout their respective versions of regulatory reform. This election cycle is no exception. Senators Sanders and Warren are both advocates for many progressive causes, such as additional regulation of Wall Street, taxes on financial transactions, and eliminating the carried interest tax loophole (the latter also supported by President Trump and many Republicans).

More recently, criticism launched by 2020 Democrats has been aimed at the Department of Labor’s (“DOL”) fiduciary rule, as well as Regulation Best Interest (“Reg BI”).

Just prior to officially joining the presidential ticket, Senator Harris co-signed a comment letter with other lawmakers criticizing the DOL’s proposed fiduciary package. The group cites the fact that certain investment advice related to 401(k) plans, individual retirement accounts, and other defined benefit plans did not exist in 1975 when the five-prong fiduciary test was established and, thus, is out of date. This has led to loopholes which, they say, allow advisers to avoid fiduciary obligations and potentially exploit clients. These loopholes were closed as the result of the partial implementation of new rules by the Obama Administration.

The group of lawmakers say these changes were effective, but the Fifth Circuit Court vacated the rule in 2018, a decision which was not appealed by the DOL. This resulted in the DOL having to propose a new rule which, much to their ire of Senator Harris and other lawmakers, reinstates the standards of the 1975 regulation.

This comment letter goes hand-and-hand with the Democrat’s 2020 platform which, without explicitly stating it, calls out Reg BI. In the draft section titled “Guaranteeing a Secure and Dignified Retirement,” Democrats stated that “financial advisers should be legally obligated to put their clients’ interests first” and that they plan to take “immediate action to reverse the Trump Administration’s regulations allowing financial advisers to prioritize their self-interest over their clients’ wellbeing.” Many Democrat lawmakers were critical of Reg BI saying that it fell short of establishing a clear fiduciary standard and did not prevent the disclosure of many conflicts, an opinion that seems to be carrying forward into their platform. Likewise, this could also be viewed as a critique of the DOL’s fiduciary rule proposal.

Neither Harris’ nor Biden’s political records indicate a progressive stance toward the financial sector (as compared to Sanders and Warren) and many of these comments appear to be aimed toward retirees and retail investors. While Biden has discussed taxing capital gains as regular income, language similar to his more progressive challengers early in the election cycle has yet to be seen. Placing these changes in the context of retirees is a popular talking point with middle-class voters without necessarily hurting his relationship with Wall Street.

Only time will tell how feasible or likely these changes are if Biden is elected. Reg BI is in effect and the DOL’s proposed fiduciary rule will likely be enacted by the time Biden would be inaugurated. Taking a legislative approach would be more difficult especially if the new Congress remains split. Put all of this in the context of a COVID pandemic and these areas may take a backseat at least for the first half of Biden’s term.

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