Borzi: Hard for Acosta to justify long DOL fiduciary rule delay

Former assistant labor secretary and architect of the regulation says its postponement could be vulnerable to court challenges

Nov 10, 2017 @ 5:25 pm

By Mark Schoeff Jr.

A former Obama administration official known as the architect of the Labor Department's fiduciary rule said Friday she doubts the agency's current leadership can justify the long implementation delay it is seeking.

Phyllis Borzi, former assistant labor secretary and head of the Employee Benefits Security Administration, guided the development of the regulation from the initial proposal in 2010 through the final rule released in April 2016. Ms. Borzi said she anticipated challenges to the rule and was particularly careful to ensure the agency made no procedural missteps in promulgating the regulation, which requires financial advisers to act in the best interests of their clients in retirement accounts.

That effort included showing evidence of a market failure, seeking public input, maintaining a fair and open rulemaking process, demonstrating that the recommended approach was reasonable, and providing strong policy, legal and economic analyses to support the rule.

She said current DOL Secretary Alexander Acosta is not likely to meet the same criteria for delaying the enforcement mechanisms of the rule.

"It will be very hard for the secretary of Labor to make these findings," Ms. Borzi said at a TD Ameritrade Institutional conference in Washington.

A DOL spokesman declined to comment.

Earlier this month, the DOL sent to the Office of Management and Budget the final rule to delay the DOL regulation from Jan. 1, 2018, to July 1, 2019. The delay measure will be released publicly after it is approved by OMB and sent back to DOL.

The Labor Department is seeking the delay to give it more time to reassess the impact of the rule under a directive from President Donald J. Trump. The regulation was partially implemented in June, and the review could lead to substantial changes in its remaining parts.

Industry opponents of the DOL rule say it is too complex and costly and would sharply increase the price of advice, forcing brokers to abandon clients with small retirement accounts. Backers of the rule assert it has the teeth to mitigate broker conflicts of interest that result in the sale of inappropriate high-fee investment products that erode savings.

In an interview on the sidelines of the TDAI conference, Ms. Borzi said the delay could be vulnerable to court challenges from supporters of the rule.

"It's going to be hard for them to meet these tests to justify a delay or dilution of the rule," she said. "It's not as easy as the industry thinks: 'My guy won [Mr. Trump], and we can slide this through.'"

Ms. Borzi said industry opponents are not offering new evidence of investor harm being caused by the rule. She said their comment letters from 2009 look similar to those they submitted this year.

"They're really just recycled old studies," she said. "There's really nothing new under the sun."

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