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The Fiduciary Rule: Where Things Stand Now

Nevin Adams

If it’s possible, the final version of President Trump’s Executive Memorandum may have left us with more uncertainty than we had before.

On the morning of Feb. 3, 2017, based on what we stipulated was a draft of the memorandum, we cautioned that the fiduciary rule “may significantly alter the manner in which Americans can receive financial advice, and may not be consistent with the policies” of the Trump Administration.

However, not only those comments, but a series of specific directions to the Department of Labor (DOL) remained in the final version, specifically that DOL:

  • conduct an updated economic and legal analysis concerning the likely impact of the rule to examine whether the rule has or is likely to harm investors due to a reduction in access to retirement accounts or advice;

  • consider whether it has resulted in dislocations or disruptions within the retirement services industry that may adversely affect investors or retirees (the latter a point that has been made consistently in litigation that has challenged the rule); and

  • determine whether the rule is “likely to cause an increase in litigation, and an increase in the prices that investors and retirees must pay to gain access to retirement services.”

What’s more, the final executive memorandum still notes should those reviews result in an “affirmative determination” regarding any of those points, or if they conclude “for any other reason after appropriate review that the Fiduciary Duty Rule is inconsistent with the priority identified earlier in this memorandum,” then the Labor Department is directed to “publish for notice and comment a proposed rule rescinding or revising the Rule, as appropriate and as consistent with law.”

What’s Different?

What was different, of course, was that the final version didn’t specify a time period for review or the length, if any, of the delay – unlike the draft which, along with the foregoing instructions, included a delay in the rule of 180 days. (Also dropped was a specific direction as to “whether the prohibited transaction exemptions (PTEs) issued in conjunction with the rule, especially the best interest contract exemption, substantially undermine the rule’s effectiveness at achieving its intended goals.”)

What we also now have, in what may well be a record for brevity in press releases, is the response from the DOL, which said simply: “The Department of Labor will now consider its legal options to delay the applicability date as we comply with the President’s memorandum.” Moreover, the webpage where the DOL’s Employee Benefit Security Administration (EBSA) has listed its information on the fiduciary regulation, a highlighted box now notes: “On February 3, 2017, President Trump signed a Presidential Memorandum directing the Department of Labor to examine the Fiduciary Duty Rule. The information contained on these pages may be subject to change as a result of that examination. Please continue to check this website for updated information.”

So, as things stand today, the April 10 date remains in place. As does our collective uncertainty as to its future. But we’ll let you know if/when that changes.