Despite battling several lawsuits designed to eliminate a recently approved investment-advice regulation for retirement accounts, the Labor Department is encouraging financial firms and advisers to come forward with their questions about how to comply with the rule.
The final version of the regulation, which requires advisers to act in the best interests of their clients in 401(k), individual retirement accounts and other qualified accounts, was released in early April. By the first of June, five lawsuits had been filed to halt implementation.
The suits may be expedited, with
one scheduled for a court hearing next month. In the meantime, the DOL is not shying away from conversations about the rule.
“There's no real chilling effect” from the lawsuits, DOL deputy assistant secretary Timothy Hauser said in an interview last Friday. “People are making significant changes [to comply], and we have to get into the weeds with them. We're not going to let lawsuits change that.”
Last month, Mr. Hauser abruptly backed out of an appearance at an Insured Retirement Institute conference in Washington days after the group joined one of the lawsuits as a co-plaintiff.
Mr. Hauser downplayed the incident Friday, calling it “a function of my calendar.”
He will be appearing at an Investment Management Consultants Association conference in Washington on July 18 and “a whole lot of events in the fall,” he said.
Mr. Hauser said that he had conducted about a half dozen meetings last week with firms and other groups who have questions about the complex rule in addition to many phone conversations.
Steve Saxon, chairman of the Groom Law Group, represents many clients who will have to comply with the DOL rule. He gives the agency meetings a positive review.
“The department has been very well prepared and the conversations have been productive,” Mr. Saxon said.
The DOL is using the feedback it's receiving to zero in on aspects of the regulation that are causing particular concern.
“You'll see additional public guidance in the future,” Mr. Hauser said.
He declined to say when the guidance will be released or in what form.
(More: Everything you need to know about the DOL fiduciary rule as it develops)
Although his calendar is usually full with meetings and his phone keeps ringing, Mr. Hauser said he is concerned about financial firms and interest groups that are reluctant to contact the agency with questions because they're afraid of the answers they might get.
“Some of the folks who really should be talking to us aren't,” Mr. Hauser said. “You're virtually always better coming in and telling us what the problem is. It might be that you can help shape the guidance we give.”
He cautioned firms and advisers against “looking for ways out of the contract requirement,” a provision that allows advisers latitude in their compensation arrangements as long as they sign a legally binding contract in which they agree to act in their clients' best interests.
Given that the
applicability date of the rule is next April, firms should ask their questions soon, according to Mr. Hauser.
“It's much better for them to be hearing [answers] now before they've spent all the time and money to build compliance structures and supervisory mechanisms,” he said.
Mr. Saxon is encouraging his clients to meet with DOL officials.
“If you bring the right set of facts to the table and you are persuasive in the arguments you make, you have a better chance of obtaining a positive result than if you sit on your hands,” Mr. Saxon said.
