DOL Fiduciary Rule Delay All but Certain as Comment Period Closes

While detractors of the Labor Department’s plan to delay the remainder of its fiduciary rule continued to tell Labor that such a delay would be costly for investors, supporters of the delay argue that it’s all but needed in order to make revisions, propose new streamlined exemptions and coordinate with the Securities and Exchange Commission.

Labor on Aug. 31 set a 15-day comment period for its proposed 18-month delay — from Jan. 1, 2018 to July 1, 2019 — to the more onerous prohibited transaction exemptions of its fiduciary rule. The comment period expired Friday.

With comments both for and against a delay in hand, all bets are on Labor forging ahead with the 18-month delay.

“DOL needs to propose its changes to the [best-interest contract] exemption and related exemptions,” said Steve Saxon, partner at Groom Law Group in Washington. “In order to obtain comments on these changes and hold hearings, DOL would need to offer these changes this fall to give providers time to get ready before July 2019.”

Micah Hauptman, financial services counsel for the Consumer Federation of America — a staunch fiduciary rule advocate — added in a comment to ThinkAdvisor that “It’s pretty clear that the DOL has predetermined the outcome and is prepared to engage in irrational action to get there. We strongly urge them to reconsider their decision” to delay.

The delay is rather “a stay,” Hauptman said, “aimed at effectively repealing the exemptions’ critical conditions and must be justified as such.”

In CFA’s Friday comment letter to Labor, Hauptman writes that “to characterize what the department is proposing as a ‘delay’ is simply incorrect. Delay implies that the rule will be implemented at the end of the proposed 18-month delay period. However, that’s clearly not the department’s intent here.”

Rather, Hauptman continued, “the intent is to grant what is effectively a revocation of the applicability of the most consequential provisions of the rule, by staying them, with the goal that implementation of these provisions never occurs.”

Duane Thompson, senior policy analyst at Fi360, a fiduciary training and technology company, agrees that despite comments for and against a delay, the odds are “99 to one it goes through.” 

The Financial Services Institute told Labor during the comment period that FSI agrees “that a delay is necessary and appropriate to allow careful consideration of comments, evaluate the rule’s potential undue burden, and to identify potential alternatives that could reduce costs and increase benefits to affected parties without compromising investor protections.”