DOL Seeks 18-Month Delay in Fiduciary Rule Transition
The Trump administration’s Department of Labor has filed to delay the date for implementing the final part of its retirement-account fiduciary rule by 18 months, giving it and critics more time to modify or repeal some of its controversial provisions.
The rule that requires brokers to act as fiduciaries by putting their client interests ahead of their own was effective on June 9, but as of this date has little enforcement weight. New Labor Secretary Alexander Acosta earlier in the year delayed the effective date of several requirements, including one giving customers the right to bring class-action suits for alleged violations of best-interest contracts.
That and other pending provisions that have been opposed by many securities industry and insurance-product manufacturer trade groups would have been required as of January, although the DOL has said it was reviewing the rules under an order from the President.
They now have more breathing room because Acosta notified a court on Wednesday that his department has filed a proposal with the Office of Management and Budget to push back implementation of the rest of the rule by 18 months until July 1, 2019.
The delay was signaled in a notice to the U.S. District Court in the District of Minnesota, where Thrivent Financial for Lutherans has brought a lawsuit against Acosta and the DOL challenging certain provisions of the rule.
Many brokerage firms and advisors have argued that the fiduciary rule has scared them into depriving investors of account and product choices, an argument that consumer groups supporting the rule deem hypocritical. Merrill Lynch and a few other firms are prohibiting brokers from selling commission-based retirement accounts because of the DOL’s concern that brokers might favor certain mutual funds and other products that provide them high commissions.
The fiduciary rule permits commission-based accounts subject to firms’ providing best-interest exemption (BICE) contracts and other disclosures that open them to litigation.
Acosta’s notice to the court did not provide an explanation for the request for the delay, which also postpones exemption requirements for advice on individual retirement account transfers and for advice given by brokers, insurance agents or pension consultants to employee benefit plan sponsors.
Several trade groups, lobbying firms and brokerage firms, including Raymond James Financial and the U.S. Chamber of Commerce, have been urging the longer delay.
The DOL said in a legal brief filed in July that it no longer supported the best interest contract exemption as proposed under the Obama administration. The new head of the Securities and Exchange Commission also has sought to slow down DOL rule implementation, saying he hopes that his agency can work with the department on a uniform fiduciary standard that would apply to all investment accounts.