While opponents of the Department of Labor’s fiduciary rule welcomed the final rule's delay on Wednesday, they’re up in arms over what they say is the failure of the rule to comply with President Donald Trump’s directive to review the rule in its entirety.
At first blush, Labor’s 60-day delay that’s to be released in the Federal Register on Friday “appeared to be a very good first step in the review” ordered by Trump on Feb. 3, said Kent Mason, a partner at Davis & Harman in Washington. “But the problem is that in yesterday’s announcement, DOL indicates very clearly that it does not plan to revisit the June 9 date in the context of the review” ordered by Trump.
Ken Bentsen, president and CEO of the Securities Industry and Financial Markets Association, said in a Wednesday statement that SIFMA is concerned that the rule “contains convoluted extraneous conditions that are not only based on imperfect data but contradicts the intent” of Trump’s Feb. 3 order.
“The memorandum directs a review of the entire rule and its impact, not part,” Bentsen said. “We trust the department will undertake a sufficiently substantive review as requested by the president to ensure investors are not unduly harmed.”
Meanwhile, at an event held on Capitol Hill Wednesday, Sen. Elizabeth Warren, D-Mass., a staunch advocate of Labor’s fiduciary rule, released a Retirement Ripoff Counter, which she said details how important it is that the fiduciary rule be “fully” implemented.
“With Republicans now in control of the White House, the Senate and the House, consumer protection is under siege,” Warren said, “with one of the principal objects to make sure that the fiduciary rule does not go into effect.”
The Retirement Ripoff Counter, created by the Save Our Retirement Coalition of unions and consumer groups, is “a way to show what bad rules do,” Warren said.
Since Trump’s Feb. 3 order, “Americans have lost nearly $2.9 billion" from conflicted retirement advice. "That’s $46 million per day,” she added.
Warren stated that “families stand to lose nearly $4 billion because of the two-month delay” that the Trump administration just finalized.
Said Warren: “These numbers are huge…. I want you to think about what it means family by family,” adding that “being in this fight [for the fiduciary rule] matters, because it has already begun to change the industry, [with] prices and fees coming down and some of the worst products coming off the shelf.”
The “counter will be turning up, and we look forward to surprising you with exactly where,” added Lisa Donner, executive director of Americans for Financial Reform, who also spoke at the event.
Mason noted that under the final rule issued Wednesday, Labor “characterizes the new definition of a fiduciary ‘as among the least controversial aspects of the rulemaking project.’”
Therefore, Mason continued, “according to the DOL, there is no need to conduct the review ordered by the president before the new definition takes effect June 9. Nor apparently is there a need to even look at the comments submitted in response to the president’s memorandum, which are due April 17.”
Without any analysis, Mason said, “DOL has concluded that there is no reason to perform the presidentially ordered review of the definition of a fiduciary prior to the new applicability date of June 9.”
But Micah Hauptman, financial services counsel for the Consumer Federation of America, who attended the event with Warren on Capitol Hill, told ThinkAdvisor that “the entire [fiduciary] rule is still under full assault, but it’s at least encouraging that [Labor] has said that it doesn’t anticipate longer delays of these core provisions pending re-examination of the rule.”
As Labor Secretary nominee R. Alexander Acosta told members of the Senate Health, Education, Labor & Pensions Committee during his confirmation hearing on March 22, Trump’s executive action directs Labor to assess specific questions regarding the rule—such as: “Will the rule reduce the investment options available to investors? Will the rule increase litigation? Will the rule financially impact retiree investors?”
The executive action, Acosta added, “directs the secretary of Labor and Department of Labor to repeal or revise the fiduciary rule if any of the criteria laid out in that executive order is found.”
The Insured Retirement Institute also noted its disappointment that the delay did not include “all the provisions of the rule.” Trump, IRI stated, “directed the department to examine all questions of law and policy raised by the rule, the potential harm that could be caused to retirement savers, as well as potential market disruptions that could occur from the department’s failure to delay all the provisions of the rule.”
As Erin Sweeney, an attorney with Miller & Chavalier explained, the final rule issued Wednesday delayed a portion of the fiduciary rule and related exemptions until June 9, and delayed compliance with related disclosures and other conditions until Jan. 1, 2018.
IRI stated that it’s hopeful that a delay to at least Jan. 1, 2018, will be instituted for “all the provisions” expeditiously following the closing of the comment period on April 17.
In the final rule delaying the compliance date, Labor requested comments on the issues raised by Trump's Feb. 3 memorandum, and related questions. Labor said that it "urges commenters to submit data, information and analyses responsive to the requests, so that it can complete its work pursuant to the memorandum as carefully, thoughtfully and expeditiously as possible."
Without a delay of the "additional provisions of the rule set to take effect on June 9 … the department will not be able to properly assess the harm caused to the retirement savers and the financial services firms that serve them,” IRI argued.
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