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Department of Labor Moves to Delay Fiduciary Rule

On Thursday, February 9, 2017, the Department of Labor (DOL) filed a notice with the Office of Management and Budget (OMB) to delay the effective date of the final Conflict of Interest Rule that re-defines who is a fiduciary (the Fiduciary Rule).  While the exact language of the notice will not be known until the OMB’s review is complete and the proposed rule is sent to the Federal Register, many sources are reporting that the notice delays the effective date of the Fiduciary Rule for one hundred eighty (180) days.  The OMB usually takes around ten (10) to fifteen (15) days to review a regulation, and the comment period will reportedly be as short as fifteen (15) days, meaning that the notice delaying the effective date of the Fiduciary Rule by one hundred eighty (180) days could be official as soon as early March.

The DOL is also working on a second notice to be filed with the OMB, which if approved, will start a new notice and comment period for the Fiduciary Rule.  By pushing out the effective date of the Fiduciary Rule one hundred and eighty (180) days, the DOL now has time to hold another notice and comment period before the rule takes effect.  During this notice and comment period, the DOL will hear concerns on the Fiduciary Rule.  This is likely a result of the executive order issued by President Trump.

On February 3, 2017, President Trump signed an executive order, ordering the DOL to review the Fiduciary Rule.  The executive order more specifically required the DOL to examine (a) whether the Fiduciary Rule is likely to harm investors by reducing access to retirement products, (b) cause dislocation or disruption within the retirement service industry, and/or (c) is likely to cause an increase in litigation.

The executive order does not delay, amend, or withdraw the enforcement of the Fiduciary Rule which goes into effect in April, 2017, instead it orders the DOL to examine the Fiduciary Rule for the above issues.  As stated above, it is likely that as a result of the President’s executive order, and the DOL’s instructed review of the Fiduciary Rule, that the DOL determined that the rule should be delayed and subject to future comment.

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DOL Fiduciary Rule? No Certainty

Authors:  Jennifer S. Kiesewetter, Esq. and Minyon Bolton, JD

The U.S. Department of Labor’s (“DOL”) April 6, 2016 new fiduciary rule (“Fiduciary Rule” or “Rule”) is under attack.  Although the Rule became effective on June 7, 2016, it has an April 10, 2017 applicability date.  With the Republicans now occupying a majority in the House of Representatives and Senate and Donald Trump’s inauguration as the 45th President, no certainty exists as to the occurrence of the Rule’s pending applicability date. 


The Executive Branch has already issued responses to the Rule.  On January 20, 2017, the White House issued a Memorandum from Reince Priebus to the heads of executive departments and agencies requesting a 60-day delay, in part, for the effective date of regulations that have been published in the Office of the Federal Register but have not taken effect.  The Fiduciary Rule fits squarely within this scenario as the enforcement aspect of the Rule, and exemptions, have not gone into effect yet.   


Additionally, Trump has nominated Andy Puzder (who is a proponent of less labor regulation) to serve as the director of the DOL.  As DOL director, Puzder may modify or draft guidance documents for the DOL’s Employee Benefits Security Administration (“EBSA”), slow or prevent EBSA’s enforcement of the Fiduciary Rule, direct EBSA’s priorities away from the Fiduciary Rule, and reduce EBSA’s budget.  Additionally, given the fierce opposition to the Rule, Trump may likely take specific executive action that delays the applicability date or restricts enforcement of the Rule. 


Under the leadership of a Trump-nominated director, the DOL may re-open the notice and comment period for the Fiduciary Rule to allow time for the new DOL director to review the Rule for questions of fact, law, or policy.  While guidance exists on the length of notice and comment periods, no specific rules as to the length exist, thus this period could last months.  The DOL may further propose a new rule to delay the applicability date of the Fiduciary Rule.  Under this agency rulemaking scheme, the Fiduciary Rule’s applicability date could be indefinitely delayed or simply never triggered.   


Legislators have already responded to the Fiduciary Rule.  In April of 2016, Republican Representatives introduced a Resolution in Congress to repeal the Fiduciary Rule that was subsequently vetoed by President Obama two (2) months later.  In January of 2017, Congressman Joe Wilson (R-S.C.) introduced the Protecting American Families’ Retirement Advice Act that proposes to delay the applicability date of the Fiduciary Rule for two (2) years.  This new bill has been picking up traction as it moves through the House.  Congress may also pass a defunding bill, reducing the budget for the DOL to enforce the Rule which would make it largely symbolic. 


With the various options available through White House, agency, and legislative action, several vehicles are available for a Fiduciary Rule overhaul.  These options can be used independent of one another or in conjunction with one another.  In anticipation of the Rule’s April 10, 2017 applicability date, financial and insurance industries have already begun implementing compliance changes.  Regardless of the uncertainty surrounding the Rule, one thing for certain is that the role of a fiduciary is under scrutiny.

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