Obama-era rule on financial advisers to go forward, for now

Ellen Mills
May 24, 2017

New DOL head Acosta, who had not previously spoken publicly about the rule, announced yesterday that there would be no more delays of the fiduciary rule before the June 9th applicability date.

The rule - also known as the conflict-of-interest rule - will require brokers and advisors to recommend investments that are in the best interests of clients, not merely suitable for them, when they give retirement account advice.

Parts of the rule were supposed to take effect April 10, but the Labor Department delayed that for 60 days to conduct the review.

Calling the fiduciary rule a "controversial regulation", Acosta said while courts have upheld the rule as consistent with Congress' delegated authority, it may not align with Trump's "deregulatory goals". But Acosta now says he has found "no principled legal basis to change the June 9 date".

The financial industry, on the other hand, has argued that the rule would limit retirees' investment choices by forcing advisers to steer them to low-risk options.

The US Labor Department will implement its fiduciary rule on June 9 with no further delays, marking a short-term win for consumer protection advocates.

The DOL added, "Many of the most promising responses to the fiduciary rule, such as brokers" possible use of "clean shares' in the mutual fund market to mitigate conflicts of interest, are likely to take significantly more time to implement than what the department envisioned when it set January 1, 2018, as the applicability date for full compliance with all of the exemptions' conditions".

Acosta also hopes the SEC "will be a full participant" in drafting a fiduciary rule, which the commission has so far declined to move on.

Specifically, starting on June 9, firms and their advisers must comply with conditions of the rule if they receive compensation for investment advice in a manner that would violate the prohibited transaction rules, which are created to protect retirement investors from conflicts of interest. The association was founded in 2003 and has approximately 4,500 members who are key decision makers, representing more than 220,000 professionals throughout the nation - including sponsor members who have raised in excess of $200 billion in equity and serve more than 1 million investors. The initial phase of the rule's implementation will begin June 9.

Wall Street firms may still find a win of sorts, despite that the rule's implementation date was not blocked. That's surprising because the Trump administration had previously signaled that it wanted to roll back the rule.

The Department of Labor has a confusing message about its fiduciary rule. But it's leaving open the possibility that deep changes to the rule will still be made. But if you receive any financial advice - including more indirectly, through your workplace retirement plan, for example - you could be protected by the rule.

Neil Bradley, chief policy officer for the U.S. Chamber of Commerce, another fiduciary rule opponent, said the business trade group would "continue to pursue all available options" to stop the rule. "That is a fantasy", she said.

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