Despite the Department of Labor proposing a 60-day delay to its fiduciary rule, “as of today, April 10 is the applicability date,” Dan Kleinman, partner at Morgan Lewis & Bockius in Washington, said Thursday.
That being said, what chance is there that April 10 will not be the compliance date? “I think it’s high 80% to 90% that we will get to that [April 10] date and the rule won’t be applicable,” Kleinman said at the Investment Adviser Association’s annual compliance conference in Washington.
Labor released on Wednesday a proposed rule to extend for 60 days the applicability date of its fiduciary rule under the Employee Retirement Income Security Act.
There have been some “headwinds,” with the administration finding that delaying the rule “was not as easy as originally thought,” but “I was a firm believer that we were always going to get a delay.”
So there’s a “high probability of delay, but we’re just not there yet,” Kleinman added.
Under the plan, Labor will take comments for 15 days on whether the proposed rule should be finalized and will take comments for 45 days on a list of questions about the impact of the fiduciary regulation and the exemptions.
With the Office of Management and Budget announcing that it had finished its review of Labor’s request to delay implementation of its fiduciary rule, “OMB has agreed it should be delayed for 60 days,” Kleinman added.
Hill Pressure on SEC
Richard Roberts, principal at Washington lobbying firm RR&G, stated on another panel discussion at the IAA meeting that there will “continue to be pressure” from Capitol Hill via bills being introduced, statements, as well as hearings for the Securities and Exchange Commission “to fill this [fiduciary] void” once the DOL fiduciary rule is “unwound.”
That being said, “I would be surprised if the SEC acted anytime soon” on its own fiduciary rule, Roberts added.
The nominations process to fill the three open SEC commission seats — including the confirmation of Sullivan and Cromwell attorney Jay Clayton to be chairman — is “moving very slow,” Roberts added. “It’s my understanding that the SEC chair nominee papers have not yet been submitted to the Senate.”
His nomination hearing is anticipated sometime this month.
Andrew “Buddy” Donohue, former SEC Chairwoman Mary Jo White’s chief of staff who left along with White in January, said on the panel with Roberts that White was “quite vocal about the fact she wanted to tackle and adopt a fiduciary standard,” but lacked commission support. White brought Donohue in as her chief of staff in May 2015 to specifically help advance a fiduciary rule. Donohue said Thursday at the IAA event that it was “probably one of my failures, not getting that [fiduciary rule] over the finish line.”
But during White’s time as SEC chair, “there’s been a ton of work done” on a fiduciary rule proposal, Donohue added. “It’s pretty far along.”
As to whether the new commission will consider and advance a fiduciary rule, Donohue said that Clayton has not voiced any opinion on the matter.
Financial Choice Act 2.0
As to the reintroduction of House Financial Services Committee Chairman Jeb Hensarling’s Financial Choice Act, Roberts noted that is “moving slower than folks thought, even slower than the chairman [Hensarling] thought.”
Roberts added: “I thought he’d have it introduced by the end of March … It keeps getting delayed for the time being. There seems to be a sense that [lawmakers] should move to an issue like flood insurance, where there’s bipartisan support. ‘Thornier issues’” like the Financial Choice Act are being pushed back.
— Check out What Will New Financial Choice Act Look Like? on ThinkAdvisor.