By Sarah N. Lynch
WASHINGTON (Reuters) - The Labor Department secretary tried to drum up support from skeptical Republicans on Wednesday for a controversial plan to rein in conflicts by brokers who offer retirement advice, saying he believes consensus for new regulations is growing.
In a hearing before a U.S. House of Representatives panel, Labor Secretary Tom Perez struck a positive and conciliatory tone, even as the panel's top Republican urged him to withdraw the plan.
At issue are draft rules that would require brokers offering retirement advice to enter into contracts with customers that require them to act in their clients' best financial interest.
The department argues the rules are needed because brokers are currently held to a lower "suitability" standard and may recommend retirement products that boost commissions, even if they are not the best for their clients.
The financial services sector has staunchly resisted the department's efforts, saying the plan could vastly limit the kinds of investment options available to retirees and curb compensation for brokers.
Lawmakers repeatedly questioned Perez on Wednesday about why new rules are needed, and whether the best interest contract is appropriate.
Perez defended the need for the contracts, saying they are a "flexible road map" to hold brokers accountable and make sure they are complying with the rules.
"The best interest contract is...our Ronald Reagan provision in the rule," Perez said. "We want to trust and verify."
Some industry leaders have said that brokerages would drop small accounts because they would not be profitable, given costs of complying with the plan.
The industry wants the Securities and Exchange Commission to take the lead in writing a best-interest standard because the SEC polices brokers and has broader jurisdiction than the Labor Department. The Labor Department has power over retirement accounts that fall under the federal law known as ERISA.
The opposition has been so strong that the Labor Department was forced to scrap a first draft of the rule several years ago and rewrite it. The new draft was unveiled in April.
Many Republicans, and even some moderate Democrats, have sided with the industry.
On Wednesday, for example, a House appropriations panel approved a draft bill that would ban the Labor Department from spending money to implement the rule.
Perez was repeatedly questioned on Wednesday about whether he has coordinated closely enough with the SEC. He said he has had eight meetings or phone calls with SEC Chair Mary Jo White.
His department also turned over about 800 pages worth of documents to the committee showing correspondence with the SEC on the drafting of the plan.