Among the most hotly contested rules currently in the regulatory pipeline is an effort to create a fiduciary duty for brokers who offer retirement advice, a White House-led effort to curb conflicts of interest. Rules to do so, as required by the Dodd-Frank Act and currently being crafted by both the Department of Labor and Securities and Exchange Commission, would limit all broker-dealers and advisers to only providing financial advice that is in the best interests of their clients.

Because the Labor Department’s final rule, submitted on Jan 29 to the White House’s Office of Management and Budget for final review, will predate anything from the SEC (which has yet to propose its rule) by at least several months, there is also an argument that the process undermines a perceived attempt by the Dodd-Frank Act to position the latter Commission at the primary regulator.

While many investor advocates applaud the effort to extend the scope of the Employee Retirement Income Security Act, industry critics have been, to put it mildly, disturbed by the plan. Among their concerns are that the rule would have unintended consequences and, counter to the government’s intent, harm retirement savers by drive up the price of investment advice and would ultimately decrease the availability of advice for low- and middle-income investors.  Nearly any conversation with a client, or potential client, could earn the distinction of being investment advice, they warn.

The latest attack on the rules, and the process behind them, comes from Sen. Ron Johnson (R-Wis.), chairman of the Senate Homeland Security and Governmental Affairs Committee, and a report issued on Wednesday by that committee.

The report claims that the “Labor Department disregarded concerns and recommendations from career, nonpartisan, professional staff at the Securities and Exchange Commission,” as well as regulatory experts at the Office of Information and Regulatory Affairs within the Office of Management and Budget, and Treasury Department officials.  The “Labor Department pushed to issue the regulation at the expense of thoughtful deliberation” and “political appointees at the White House played a key role in driving the rulemaking process,” the report alleges.

Despite public assurances that the Labor Department was collaborating with the SEC, emails reveal discord between the agencies about the rulemaking, the report says.  In one included example, a Labor Department employee wrote to his SEC counterpart: “We have now gone far beyond the point where your input was helpful to me…If you have nothing new to bring up, please stop emailing me.” The SEC staffer responded: “I am now also utterly confused as to what the purpose of the proposed DOL rule is.”

Another claim: SEC staff identified at least 26 items of concern related to the substantive content of the proposed rule, but the Labor Department declined to fully resolve all of the concerns. After the Labor Department sought to address the SEC’s stated items of concern, a senior SEC official emphasized to the Labor Department that concerns remained: “We continue to believe that commentators are likely to raise concerns that the proposal may result in reduced pricing options, rising costs and limited access to retirement advice, particularly for retail investors. Commentators also may express concerns that broker-dealers, as a practical matter, may be unlikely to use the exemptions provided and may stop providing services because of the number of conditions imposed, likely compliance costs, and lack of clarity around several provisions.”

Coordination between the two agencies has been questioned in the past. Former SEC Commissioner Dan Gallagher addressed it in a speech last February.

“Despite public reports of close coordination between the DoL and SEC staff, I believe this coordination has been nothing more than a ‘check the box’ exercise designed to legitimize the runaway train that is their fiduciary rulemaking,” he said.