While the Department of Labor struggles to unglue itself from the Obama Administration's so-called fiduciary rule for brokers, House Republicans are taking matters into their own hands. Rep. Ann Wagner (R-Mo.) has filed draft discussion legislation that would repeal the Labor Department’s fiduciary rule “and create standards of conduct for brokers and dealers that are in the best interest of their retail customers.”

The forthcoming bill requires, among other things, “that a broker-dealer must act in the retail customer’s best interest when providing a recommendation that must reflect reasonable diligence; and reflect the reasonable care, skill and prudence that a broker-dealer would exercise based on the customer’s investment profile.”

The bill also imposes enhanced disclosure obligations on broker-dealers, and provides the SEC with rulemaking authority to the to promulgate the content of such disclosures.

The proposed legislation will be discussed during a House Financial Services Committee hearing on July 13.

Already, there is “strong opposition” to Wagner’s discussion draft, notably from the Consumer Federation of America.

“While the draft bill purports to impose a best interest standard on broker-dealers’ investment recommendations, it would dramatically weaken existing protections for retirement savers without providing meaningful new protections for investors in non-retirement accounts,” wrote Barbara Roper, director of investor protection, and Micah Hauptman, financial services counsel in a letter to the House Financial Services Committee.

They added: “The bill would repeal the Department of Labor conflict of interest rule just as it is beginning to deliver the best interest advice that retirement savers need and deserve… Since brokers and insurance agents are now required to provide fiduciary advice and not just self-interested sales recommendations dressed up as advice, retirement savers’ access to genuine advice has been dramatically expanded as a result of the rule.”

In the existing rule’s place, the bill would “apply a best interest standard in name only to brokers’ retirement and non-retirement account investment recommendations,” Roper and Hauptman wrote.

The bill also “denies regulators the ability to redress its many shortcomings.”

“Under the bill, both the Securities and Exchange Commission and the Departments of Labor and Treasury would be precluded from adopting any requirements for brokers’ recommendations that are “in addition to” the bill’s requirements,” they wrote. “State authority would also be broadly preempted. Thus, if these agencies wanted to adopt clarifying rules, shore up ineffective protections, or address unforeseen problems that may emerge in the future, they would be unable to do so.”

“The draft bill would increase investor confusion,” the letter argues. “By scrupulously avoiding using the term ‘fiduciary duty’ to describe its best interest standard, and by requiring no meaningful limits on conflicts, the bill strongly suggests that something less than a true fiduciary standard is intended to apply to brokers’ recommendations. This implication that a weaker standard is intended is further reinforced by the bill’s broad preemption of state laws that do impose a fiduciary duty on brokers.”