DOL Proposes 60-Day Delay on Fiduciary Rule
The Department of Labor has bowed to pressure from opponents of its fiduciary rule, announcing a proposal to push back the rule’s implementation date by two months and opening it to public comment.
The rule, which requires retirement brokers to put clients’ interests first, was scheduled to go into effect April 10. The DOL’s proposal, which is open to public comment for the next 15 days, is to delay the effective date to June 9. The decision follows a February 3 memorandum from President Donald Trump directing the DOL to reexamine the rule. Following that memorandum, the DOL sought approval from the Office of Management and Budget for a 180-day delay of the rule. On Monday the OMB finished its review, deeming the rule “economically significant,” according to ThinkAdvisor.
The DOL is also seeking comment for the next 45 days on issues raised in the memorandum. More specifically, the DOL’s economists will evaluate whether the rule would cut savers’ access to financial advice, lead to more litigation and hurt the financial services sector, the Wall Street Journal writes.
But just because it’s seeking a delay, the DOL isn’t likely to repeal the rule entirely, Arjun Saxena, a partner at consulting firm PricewaterhouseCoopers tells the Journal. It’s more probable that the agency takes out certain contentious parts of the rule, such as the private right to sue, he tells the paper. Saxena also believes more delays are likely as long as the DOL doesn’t have anyone permanently at the helm, the Journal writes. Earlier this month, Trump’s pick to head the DOL, Andrew Puzder, withdrew his nomination, but the president quickly nominated Alexander Acosta to lead the department. Acosta, a former National Labor Relations Board member, isn’t expected to meet as much opposition during his confirmation hearings as was Puzder, who owns a fast-food conglomerate accused of wage theft.
The rule has long faced fierce opposition from industry groups in the courts and legislative pressure from Republican lawmakers.
The industry, meanwhile, is forging ahead. Following Trump’s memorandum, large brokerages including Morgan Stanley, LPL, Merrill Lynch and Wells Fargo said they’re going through with plans set in motion to comply with the rule, although their methods differ, as reported previously. Some firms, such as Merrill Lynch, have opted to stop offering commission-based IRAs to reduce potential conflicts of interest for its brokers. Others, including Morgan Stanley and Wells Fargo, decided to continue offering commission-based accounts under the rule’s best interest contract exemption, which allows the sale of some commission-based products after brokers sign a best interest contract with their clients.