In an op-ed published at the Wall Street Journal on Monday, US Secretary of Labor Alexander Acosta announced that the “fiduciary rule,” a Labor Department regulation introduced by the Obama administration that requires financial advisors to act in their clients’ best interests when advising them about retirement, will go into effect on June 9 without further delay. The department will continue to seek public comment on the rule and how it might be revised, Acosta writes, and is broadly committed to President Donald Trump’s agenda of rolling back Obama-era regulations, but has “found no principled legal basis” under the Administrative Procedure Act to delay the rule any further (It was originally scheduled to go into effect in April, but was delayed 60 days to give the department time to complete a review ordered by Trump in February).
The Labor Department followed up on Monday evening with a series of FAQ explaining how financial institutions and advisors must comply and when: While the rule goes into effect next month, a transition period is provided for, and certain provisions will not become applicable until January 1, 2018. According to the FAQs, that date may change:
The Department is also aware that after the Fiduciary Rule was issued firms have begun to develop new business models and innovative market products. Many of the most promising responses to the Fiduciary Rule, such as brokers’ possible use of “clean shares” in the mutual fund market to mitigate conflicts of interest, are likely to take significantly more time to implement than what the Department envisioned when it set January 1, 2018, as the applicability date for full compliance with all of the exemptions’ conditions. By granting additional time, and perhaps creating a new streamlined exemption based upon the use of clean shares and other innovations for example, it may be possible for firms to create a compliance mechanism that is less costly and more effective than the sorts of interim measures that they might otherwise use.
Despite Acosta’s insistence that the rule still remains subject to revision, Politico hears from lobbyists for the financial services industry that they are disappointed in the department’s decision not to delay it further. Advocates of the rule, meanwhile, are celebrating, Employee Benefit News reports:
Although the Labor Department could still make revisions to regulation after completing its review, fiduciary supporters welcomed the news. “Evidence shows lobbyists’ attacks on the rule are unfounded. This was the right decision for investors and honest firms,” Barbara Roper, director of investor protection at the Consumer Federation of America, tweeted at Acosta.
“We are confident that any data-driven, robust analysis that fairly considers the facts will prove again that Americans saving for retirement deserve to have their best interests put above their financial advisers’ economic interests,” adds Dennis Kelleher, president of advocacy group Better Markets.
The fiduciary rule has indeed proven difficult to unwind, despite both the administration and Congress opposing it: As observers noted in February when a federal judge rejected a lawsuit seeking to have the rule overturned, amending the regulation through the federal government’s formal rule-making procedure is a much slower process than the quick win in court opponents had hoped for. The easiest way to get rid of the fiduciary rule at this point would be through congressional action, and two US Representatives have introduced legislation to repeal or delay the rule, but pushing one of these bills through both houses of Congress might be difficult.