Delay of DOL fiduciary rule likely to extend beyond 60 days

Agency will need more than two months to conduct assessment of regulation directed by President Trump

Mar 1, 2017 @ 2:19 pm

By Mark Schoeff Jr.

+ Zoom

The delay of the April deadline for the Department of Labor's fiduciary rule is likely to last longer than the 60 days the agency is initially seeking.

The agency released its proposal Wednesday to push the April 10 applicability date back to June 9 so that it can conduct the review of the regulation that President Donald J. Trump directed the agency to undertake in a Feb. 3 memo.

Mr. Trump said DOL should assess whether the rule would limit investors' access to investment products or advice, cause disruptions in the industry and increase litigation against financial firms. If the agency finds the regulation harms investors or firms, Mr. Trump said it should modify or repeal the rule, which requires all financial advisers to act in the best interests of their clients in retirement accounts.

The rule-delay proposal includes a 15-day comment period on the delay itself, and a 45-day comment period on the questions raised in Mr. Trump's memo. Both comment periods will commence when the rule proposal is published in the Federal Register on Thursday.

Doing the analysis will take longer than 60 days, said Judi Carsrud, director of federal government relations at the National Association of Insurance and Financial Advisors.

"We believe there will be another delay," she said. "They may determine they need more time when they get the comment letters, particularly the second set of comments, which speak to the rule itself."

(More: The latest news and resources on the DOL fiduciary rule)

A former DOL official also is anticipating a longer delay.

"I think many commenters will urge the final delay regulation to be for a longer period of time, perhaps 12 months," Bradford Campbell, a partner at Drinker Biddle & Reath and a former DOL assistant secretary, wrote in an email. "If the result of the review is a new notice and comment rulemaking amending the rule, a delay of a year will likely be necessary."

Supporters of the rule, who say it is necessary to protect workers and retirees from high-fee products that erode savings, say the rulemaking for the 60-day delay is being rushed.

Micah Hauptman, financial services counsel at the Consumer Federation of America, pointed to language in the delay proposal that said it would be effective on the date of the publication of the final rule in the Federal Register, which is likely to occur in late March or early April after the DOL has reviewed comments on the delay and the Office of Management and Budget has approved it.

Given that the delay was deemed a major rule, it should not become immediately effective, Mr. Hauptman said.

"That's evidence of the [delay] being arbitrary and capricious," Mr. Hauptman said. "It suggests a rushed process so that they can get the final [delay] rule effective before April 10."

But an industry opponent of the rule said what was too constricted was the 12 months financial firms had to comply — from the release of the final fiduciary rule in April 2016 until the implementation deadline a year later.

"It's always been an absurd timeframe," said Jill Hoffman, vice president of government affairs at the Financial Services Roundtable.

The fiduciary rule was created over a six-year period that involved numerous solicitations of input from the industry and investor advocates. Now the comment letters will start flowing again, and both sides will reiterate their arguments.

"I don't see how the DOL can credibly show that a delay, let alone a repeal, is justified," Mr. Hauptman said.

The delay proposal itself bolsters the proponents' position, said Maureen Thompson, vice president of public policy at the Certified Financial Planner Board of Standards Inc.

"There are points made in the release that provide evidence in support of the rule," Ms. Thompson said.

But opponents are ready to show that the regulation would cause harm.

"We are confident that the administration recognizes that this rule as it was sold to the public is not working out that way in the real world," Ms. Hoffman said.

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