A truncated comment period for a proposed delay to the Labor Department's fiduciary rule came to a close on Friday with a letter from 40 House Democrats denouncing the stall.
In their missive, the Democrats said that the Trump administration DOL was trying to undo in a matter of weeks a measure that had been carefully constructed over the course of more than six years by the preceding Obama administration. The lawmakers also characterized the stated reason for the delay — to give the agency time to reassess the rule's impact and consider modifying or repealing it, — as "specious" since the Obama DOL already vetted it.
The proposed rule would push back 60 days the implementation deadline for the regulation, which requires financial advisers to act in the best interests of their clients in retirement accounts.
"It is unacceptable that now— roughly a month before implementation of the final rule is scheduled to begin — the DOL is carelessly proposing to delay it," wrote Rep. Maxine Waters, D-Calif., and ranking member of the House Financial Services Committee, and 39 of her Democratic colleagues. "Furthermore, any argument that a delay is warranted to comply with the president's memorandum requiring the DOL to conduct additional analysis of industry product availability, disruptions and dislocations and litigation costs is specious."
As of Friday afternoon, 565 comment letters had been posted on the DOL website. That number is likely to increase substantially before the clock runs out. It will give the agency a lot of reading to do over the next couple weeks, a period in which it also has to draft a final delay rule and get it approved by the Office of Management and Budget prior to the April 10 implementation deadline.
"It's a significant undertaking," said Joshua Lichtenstein, an associate at Ropes & Gray. "There are a lot of individual letters. The final rule should have a preamble about the comments and explain why [DOL] decided to make changes or not make changes due to the comments."
Another proponent of the rule, the Consumer Federation of America, also filed a comment letter on deadline day arguing that the delay itself would harm investors and firms that had already spent millions of dollars to comply with the regulation. In language that sounded as if it could foreshadow a lawsuit against the delay, the group charged that the DOL was being driven into the delay by industry opponents questioned whether it could conduct a fair review.
"The fact that the Department has proposed to delay implementation even though its own limited analysis shows that the harm of a delay far outweighs the benefits further suggests that the Department is prepared to flout its procedural obligations and act in an arbitrary and capricious fashion in order to advance the agenda of powerful interest groups," wrote Barbara Roper and Micah Hauptman, two CFA officials.
Supporters say the rule is required to protect workers and retirees from conflicted advice that leads to sales of inappropriate high-fee investments that erode savings. Financial industry opponents in their own comment letters asserted that the delay should go into effect immediately and be extended to 180 days. They also argued that the regulation would make advice too expensive for investors with modest assets and expose financial firms to litigation risk.
The industry critics have been persuasive, according to Peter Chepucavage, an independent compliance consultant.
"The rule takes away the consumers' choice [of form of advice] without adding a significant benefit that is quantifiable," Mr. Chepucavage said. "Taking some more time is not going to hurt anybody."
But Mr. Lichtenstein was surprised by the number of comments letters in support of the measure.
"What it signifies is that the fiduciary rule, although complicated, struck a chord with the public at large," he said.
Opponents, however, are going to carry the day because they now have a president in office who is sympathetic to their arguments, according to Mr. Chepucavage.
"The current government and the industry opponents are in sync, so they're going to get [a delay]," he said.