DOL poised to advance final fiduciary rule

Politico reports the measure will move to the Office of Management and Budget by Jan. 31, setting in motion the last stages of review before finalization

Jan 20, 2016 @ 2:08 pm

By Mark Schoeff Jr.

The Labor Department is poised to advance as early as this month a final rule that would raise investment advice standards for retirement accounts.

The agency is working to get the measure to the Office of Management and Budget for review by Jan. 31, according to a report published by Politico on Tuesday. Politico based its story on two anonymous sources “familiar with the matter.”

The OMB review could take up to 90 days, but could be expedited and finished within four-to-six weeks. Once OMB has approved the rule, it would be sent back to DOL, which would then publicly release the final rule in the spring.

“The rumor mill is very active,” Fred Reish, a partner at Drinker Biddle & Reath, wrote in an email. “The prevailing thinking is that the final package of the regulation and exemptions will go to OMB in the next three weeks and could go any day now. The tea leaves say that the fiduciary package will be … published in the Federal Register somewhere between mid-March and mid-April.”

A DOL spokesman said he could not confirm when the agency will send the rule to OMB.

After a final rule is published, Congress will have 60 days to adopt a joint resolution of disapproval, if it wants to stop the regulation. Under the Congressional Review Act, lawmakers can scuttle major regulations that are estimated to have an economic impact of more than $100 million.

Last week, Congress approved a resolution to kill an Environmental Protection Agency rule. President Barack Obama vetoed the measure on Tuesday.

If Congress passes a similar resolution regarding the DOL rule, it likely would meet the same fate because Mr. Obama has come out strongly in favor of the DOL rule.

Moving it toward finalization this month would likely make it effective before the end of the Obama administration next January. Under the proposed rule, firms would have eight months to implement it.

“The sooner it goes to OMB, the better,” said Barbara Roper, director of investor protection at the Consumer Federation of America. “Industry will never stop fighting this.”

Introduced as a proposed rule last April, the measure would require financial advisers to act in the best interests of their clients in 401(k) and individual retirement accounts. It also mandates many fee disclosures.

The Obama administration argues the rule is needed to protect workers and retirees from conflicted advice that erodes their retirement savings.

Opponents assert the rule would significantly increase liability risk and regulatory costs for brokers. They say it would make giving and receiving advice much more expensive, potentially ending access to advice for people with modest accounts.

The controversial rule continues to face a perilous path.

“Under a new administration, DOL can pull it back,” said Peter Chepucavage, general counsel at Worth Consulting Group. “If it's not implemented, there would be a lot of people who would lobby the next administration to extend the implementation date or go back to the drawing board.”

Making the rule effective during the Obama administration would make it harder but not impossible for its successor to undo it.

“If it's a Republican administration, I don't think the fact that it got done in this administration will save the rule,” Ms. Roper said.


What do you think?

View comments

Recommended for you

Featured video

Gadget Girl

Orion's Clarke: Why integration is paramount for RIAs right now

Orion has tapped into a huge demand for customizable, integrated solutions that let advisers spend more time building their business. Hear from Eric Clarke and two of Orion's integrated partners to get their thoughts.

Latest news & opinion

Nontraded REITs to post worst sales since 2002

The industry is on track to raise just $4.4 billion, well off the $19.6 billion it raised just four years ago, as new regulations hinder sales.

Broker protocol for recruiting a boon for clients

New research finds advisers whose firms have joined the agreement take better care of customers.

Meet our 2017 Women to Watch

Introducing 20 female financial advisers and industry executives who are distinguished leaders, advancing the business of providing advice through their creativity and hard work.

Raymond James executives call on industry to keep broker protocol

Also ask firms to pay for the administration of the protocol to 'ensure its longevity and relevance.'

Senate committee approves tax plan but full passage not assured

Several Republican senators expressed reservations about the bill, and the GOP cannot afford too many defections.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print