If you were wondering what the Labor Department was planning to do about its reported revision of the fiduciary rule, wonder no more; a proposal has just been submitted to the Office of Management and Budget for review.
The OMB’s Office of Information and Regulatory Affairs, which is part of the White House and oversees the regulatory agenda for the federal government, shows that a proposed rule was received by the agency on June 1.
While the text of the proposal is not yet available, the title—“Improving Investment Advice for Workers & Retirees Exemption”—suggests that it involves a prohibited transaction exemption that could potentially replace the Best Interest Contract Exemption (BICE) that was thrown out by the 5th U.S. Circuit Court of Appeals’ June 2018 decision vacating the DOL’s previous fiduciary rule. It’s anticipated that the DOL’s new proposed rule will seek to harmonize its “conflict of interest” guidance with the Securities and Exchange Commission’s Regulation Best Interest, which is set to take effect June 30, 2020.
The BICE was important because it provided a means for advisors to provide advice as an ERISA fiduciary and still receive commissions, in that it varies based on the advisor’s recommendation. Following the 5th Circuit’s decision, the DOL issued Field Assistance Bulletin 2018-02 announcing that it was extending until further notice its temporary enforcement policy relating to its rule defining who is a fiduciary, as well as the associated prohibited transaction exemptions.
Meanwhile, questions were beginning to surface about whether or not the DOL would seek to propose additional investment advice guidance. The federal government’s unified regulatory agenda previously showed that the agency had set a target date of December 2019 to issue a Notice of Proposed Rulemaking, but that date came and went without any action.
Now, it looks like we may soon have some answers in terms of the DOL’s approach. The OMB generally has up to 90 days to vet the request and either approve it for release or send it back for modifications; often it takes less than 30 days to do so.
Nonetheless, in the time remaining before the end of the year, it would be difficult to finalize a regulation under the Administrative Procedure Act that couldn’t be overturned by a change in administration, as were the Obama-era regulations on state-run and municipality-sponsored plans at the beginning of the Trump administration.
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