DOL likely to address fiduciary rule again next year

Agency to consider 'regulatory options' by September, same deadline for SEC's advice rule

Oct 18, 2018 @ 4:43 pm

By Mark Schoeff Jr.

The Labor Department has signaled it will address by next fall unfinished business surrounding its investment-advice rule that was killed by a federal court earlier this year.

The agency released a regulatory agenda on Thursday that indicates that it will consider "regulatory options" to respond to the U.S. Fifth Circuit Court of Appeals decision in March to vacate the rule, which would have required brokers in retirement accounts to act in the best interests of their clients. The deadline for a proposal is September 2019.

In May, the DOL released guidance saying that financial professionals could still rely on the rule to provide advice and would not enforce violations of the rule. But the agency has not issued any further statements. Meanwhile, the Securities and Exchange Commission proposed its own advice reform package in April.

SEC Chairman Jay Clayton has not indicated when the SEC might issue a final advice rule. But the agency's own regulatory agenda said that it will come out by September.

(More:New Jersey fiduciary rule could be first of many among states post-DOL)

Given that both the DOL and the SEC have the same deadline on their regulatory agendas, some observers speculate that they are going to produce complementary measures.

Fred Reish, a partner at Drinker Biddle & Reath, said the DOL may be developing one or more regulations that would replace the best-interest contract exemption included in the deceased fiduciary rule. Those regulations would work in conjunction with an SEC rule.

"It appears that DOL and the SEC have coordinated their agendas so that the SEC's rules can be incorporated into a new exemption for prohibited transactions resulting from non-discretionary fiduciary advice," Mr. Reish wrote in an email.

The similar timeframes for the SEC and DOL actions were welcomed by the Securities Industry and Financial Markets Association, which opposed the DOL rule and supports the SEC's proposal.

"We have always asked for coordination among agencies," said Lisa Bleier, SIFMA managing director and associate general counsel. "We remain hopeful we will see that in practice."

The vague language in the DOL's regulatory agenda leaves the agency a lot of leeway in its course of action. A DOL spokeswoman was not immediately available for comment.

(More:Can investment advisers disclose away all conflicts? Can brokers?)

"Everybody is scratching their heads over this one," said Barbara Roper, director of investor protection at the Consumer Federation of America. "Nobody seems to know what is going on."

Agencies don't have to follow the deadlines on the regulatory agenda. Most observers anticipate that the SEC will issue a final advice proposal by the second quarter of next year.


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