Forty Democratic members of Congress told the Labor Department on Friday not to delay by 60 days the April 10 compliance date for its fiduciary rule, arguing in concert that such a delay is “careless” and is being fueled by the Trump administration’s “duplicative analysis” of the rule’s potential impact.
“It is unacceptable that now – roughly a month before implementation of the final rule is scheduled to begin – the DOL is carelessly proposing to delay it,” wrote Reps. Maxine Waters, D-Calif., ranking member of the House Financial Services Committee; Bobby Scott, D-Va., ranking member of the House Committee on Education and the Workforce; and Elijah Cummings, D-Md., ranking member of the House Committee on Oversight and Government Reform.
The lawmakers’ letter, sent on the last day of Labor’s 15-day comment period on the proposed delay, is among 565 commenters weighing in. Labor is also taking comments for 45 days on a list of questions about the impact of the fiduciary regulation and the exemptions.
President Donald Trump signed an executive order on Feb. 3 directing the Labor Department to undertake an assessment of its fiduciary rule, and if it deems appropriate, a proposal to revise the rulemaking, which would delay the rule’s April 10 effective date.
Acting Labor Secretary Ed Hugler said in a statement the same day that Labor would “consider its legal options to delay the applicability of the date as we comply with the president’s memorandum.”
But the forty lawmakers argued in their Friday comment letter that “any argument that a delay is warranted to comply with the president’s memorandum requiring the DOL to conduct additional analysis of industry product availability, disruptions and dislocations, and litigation costs is specious.”
Labor, they argued, “already conducted ample analysis of the relevant issues, including the three issues listed in the president’s memo. For example, the DOL specifically found that the rule would support consumer choice ‘by extending fiduciary status to more advice and providing flexible and protective [exemptions] that apply to a broad array of compensation arrangements.’ Indeed, we have already seen industry begin adapting to the rule in various ways.”
Thomas DiNapoli, New York state comptroller and trustee of the New York State Retirement Fund, the third-largest defined benefit public pension system in the country, agreed in his comment letter to Labor that the fiduciary rule should not be delayed.
“Finalization of the fiduciary rule followed several years of public outreach and diligence by USDOL, which thoroughly vetted issues such as those raised in the president’s memorandum,” DiNapoli wrote.
Since the rule was first proposed, Labor has been “thorough and thoughtful in its consideration of comments received,” he continued. “There is no need for further delays or examination. It is now time to close the loopholes that allow conflicts of interest and move the fiduciary rule forward. The fiduciary rule reflects a reasoned and reasonable approach. Middle-class workers and their beneficiaries cannot afford to wait any longer for help in protecting their retirement.”
Don Trone, founder and CEO of 3Ethos, a fiduciary rule opponent, argued in his comment that retirement savers “will only have access to ‘Stepford Portfolios.’” As a result of the “increased liability, complexity and costs associated with the [fiduciary] rules, most financial services firms are only going to offer artificial portfolios manufactured in the image of what the Department deems to be acceptable.”
Also, fiduciary expert Trone said that “there are material differences between generally accepted fiduciary best practices, and the fiduciary standard defined” by Labor’s rules.
“Many firms in the financial services industry [have] spent considerable time and money to prepare to be compliant with the new rules. However, they’re not prepared for their first class action lawsuit. The plaintiff bar is going to use generally accepted fiduciary best practices as their checklist; not the de-minimus fiduciary standard defined by the Department.”
— Check out Morningstar Sees Up to $150M in Annual Class Action Settlements Under Fiduciary Rule on ThinkAdvisor.