Obama administration abandons proposed Bush investment advice rule
By APThursday, November 19, 2009
Government abandons Bush investment advice rule
DES MOINES, Iowa — The federal government has decided to abandon a Bush administration plan that would have permitted mutual fund companies and brokerage firms to offer investment advice to 401(k) customers.
The rule would have allowed financial advisers, who work with mutual fund companies and brokerages to sell investment products, to provide investment advice to 401(k) and individual retirement account customers.
It was one of several signed by former President George W. Bush in the final days of his administration. President Barack Obama, as he took office, issued executive orders freezing all proposed federal rules changes left unfinished by Bush.
The Obama administration, after reviewing the rule, moved forward with implementation. But after taking public comment, the rule was delayed several times.
On Thursday, the Department of Labor released a statement saying the rule would be withdrawn, effectively killing it.
“The department decided to withdraw the rule based on public comments that raised sufficient doubts as to whether the conditions of the final rule…could adequately protect the interests of plan participants and beneficiaries,” the statement said.
The rule was supposed to give retirement investors increased access to advice about how to invest wisely, but critics said there was no way to be sure advisers, who also helped sell products, would give impartial advice.
House Republican leader John Boehner said the advice policy, included in the Pension Protection Act of 2006, was passed with bipartisan support. Killing it is unacceptable, he said.
“It is outrageous that the Obama administration would deny workers their right to high-quality investment advice that could help them restore valuable savings that have been lost because of this economic recession,” he said in a statement.
However, House Education and Labor Chairman George Miller said the administration was right to pull the idea.
“It would have opened the door to unscrupulous advisers to make recommendation based on their financial stake and not in the best interest of workers,” the California Democrat said.
The Department of Labor said it would propose a new rule on investment advice, but gave no specific date for its release.
AP reporter Sam Hananel contributed to this story from Washington.
