The Department of Labor’s conflict-of-interest rule is headed for a near-certain demise.
The much-maligned rule, the first phase of which is set to take effect in April of 2017, will likely be killed come January in the wake of President-elect Donald Trump’s resounding victory over Hillary Clinton on Tuesday. The reason: The election of a Republican-dominated Congress intent — as is Trump — on ripping up Obama-era regulations they view as stifling economic growth. There is also fierce opposition to the DOL rule by people within the president-elect’s camp.
The rumblings have been building for months. Most recently, a Trump backer on Wall Street tapped to serve as a campaign advisor — Skybridge Capital Managing Director Anthony Scaramucci — indicated during a Securities Enforcement Forum in Washington in late October that a Trump Administration will “repeal” the fiduciary rule, noting it’s one of the most ill-advised federal regulations crafted in the last half-century.
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Last April, during a speech about the economy in Detroit, Trump also proposed a “temporary moratorium” on new financial regulations with a view to providing economic relief for small businesses, the pause to remain in effect until the economy shows stronger signs of recovery. In the same speech, Trump called for repealing the estate tax. Under current law, the “death tax” hits estates valued at 5.45 million for individuals and $10.9 million for couples with a 40 percent levy.
Though Trump himself has not expressed an opinion on the fiduciary rule, future GOP allies in Congress say the 1,000-plus pages in DOL regulations are headed for the dustbin. Among them: backers of Congressional resolutions passed earlier this year to rescind the rule.
The supporters are not only Republicans. U.S. Senate Resolutions 33 cleared the chamber in May, by a 56 to 41 margin, with three Democrats — Sens. Joe Donnelly (Indiana), Heidi Heitkamp (North Dakota) and Jon Tester (Montana) — joining Republicans in support of blocking the DOL’s implementation of the rule. The U.S. House of Representatives passed a similar resolution, though along party lines in April, soon after the rule was finalized.
Under the Congressional Review Act, Congress had 60 days to review finalized regulations. President Obama subsequently vetoed the Congressional resolutions in June, noting in a written statement that “outdated regulations in place before this rulemaking did not ensure that financial advisers act in their clients’ best interests” — the principal aim of the rule — “when giving retirement investment advice.”
The much-maligned DOL fiduciary rule will likely be killed come January in the wake of the President-elect Donald Trump’s resounding election victory. (Photo: AP Images)
In the unlikely event a Trump Administration doesn’t gut the DOL rule come January, it will also have to survive challenges in the courts. On November 7, The National Association for Fixed Annuities (NAFA) said it will appeal a federal district judge’s decision upholding the rule. A U.S. Court of Appeals for the District of Columbia will hear the appeal.
NAFA filed its lawsuit in June seeking a preliminary injunction to stay the rule’s implementation. Judge Randall Moss, who presided over the case, denied the preliminary injunction and ruled in favor of the Labor Department on its merits in upholding the rule.