Financial industry opponents of the Department of Labor's fiduciary rule can't seem to get what they want when it comes to stopping the measure.
On Tuesday, the agency released a final rule that delays implementation of the fiduciary regulation for 60 days, pushing it from April 10 to June 9. In doing so, however, it indicated that the two provisions that were due to become applicable next week — one expanding the definition of fiduciary for advisers to retirement accounts and another outlining impartial conduct standards — will go into force in June.
"It has been close to a year since the department finalized the fiduciary rule ... There is little basis for concluding that advisers need still more time before they will be ready to give advice that is in the best interest of retirement investors and free from material misrepresentations in exchange for reasonable compensation," the
final delay rule states.
The DOL is seeking the delay in order to reassess the rule as called for in a Feb. 3 directive from President Donald J. Trump, who told the agency to modify or repeal the regulation if it was projected to limit investors' access to financial advice, cause an increase in litigation for firms or otherwise disrupt the industry.
The DOL said it will complete that review over the course of this year. Alexander Acosta, Mr. Trump's nominee for Labor secretary, is awaiting Senate confirmation, so in the meantime an acting secretary, Edward Hugler, and DOL staff are overseeing the review.
While it's doing the assessment, the provisions set for implementation on June 9 will become a reality. That doesn't sit well with opponents of the rule, most of whom were pushing for a halt of the whole regulation for at least 180 days.
"The [presidential] memorandum directs a review of the entire rule and its impact, not part," Kenneth Bentsen Jr., Securities Industry and Financial Markets Association president and chief executive said in a statement.
Kent Mason, a partner at Davis & Harman, which represents many financial firms, is miffed that the fiduciary field will be expanded this summer.
"Without any analysis, DOL has concluded that there is no reason to perform the presidentially ordered review of the definition of a fiduciary prior to the new applicability date of June 9," he wrote in an email.
Proponents of the rule have been fighting the delay. But considering that the Trump administration is targeting the rule for change, the solidity of the June 9 applicability date for part of the measure is at least a partial victory.
"This is the best version of [the delay] we could have hoped for," said Barbara Roper, director of investor protection at the Consumer Federation of America. "The industry wanted a longer delay of all the provisions of the rule, but they didn't make a convincing case for why that's necessary."
Although advisers will have to act as fiduciaries in retirement accounts as of June 9, under the rule delay they will not have to provide a written acknowledgment to clients until Jan. 1. On that date, the best-interest contract, a legally binding agreement, is scheduled to go into effect.
In the meantime, industry opponents are seeking an emergency injunction against the rule in the Fifth Circuit Court of Appeals in New Orleans. They requested a decision by April 4, but it hasn't been handed down yet.
As the DOL reviews the rule, it could request another delay.
"It's really difficult for them to do that," Ms. Roper said. "They included statements in this [delay] release that undercut that argument."
The agency said it received a total of 193,000 comment letters and petitions about the implementation delay, 178,000 opposing it and 15,000 favoring it.
