Close Close

Regulation and Compliance > Federal Regulation > SEC

DOL Fiduciary Rule Still Effective Until Court Issues Mandate: Lawyer

Your article was successfully shared with the contacts you provided.

The Labor Department’s fiduciary rule is still effective until the U.S. Court of Appeals for the 5th Circuit issues its mandate to vacate the rule, David Kaleda, principal at Groom Law Group, said Thursday.

“Yes, the [Labor Department’s] rule is still in effect until the mandate is issued,” Kaleda said at the Practising Law Institute’s Fiduciary Investment Advice 2018 event in New York.

“Conceptually, you should be doing what you have been doing” to comply with the Labor Department fiduciary rule that became effective in 2016, Kaleda said. “Why hasn’t the [5th Circuit] mandate been issued? Fair question.”

Inquiries made by Groom to the court, he said, have provided little explanation “other than they haven’t gotten to it yet,” adding that Groom has “no reason to believe” that the court will fail to issue the mandate. “Sooner or later what’s going to happen is this [Labor fiduciary] rule is going away.”

The 5th Circuit had yet to issue its mandate to vacate Labor’s rule, which was  supposed to occur on May 7, by press time Thursday afternoon.

Two former Securities and Exchange Commission officials also explained during the PLI event why they believe the SEC did not pursue a “uniform” fiduciary standard in the agency’s newly released standard of conduct proposal.

Andrew “Buddy” Donohue, a lawyer at Shearman & Sterling in New York — who was chief of staff to former SEC Chairwoman Mary Jo White — explained that the challenge in pursuing a uniform duty, which was championed by White, is to “keep it uniform.”

In the broker-dealer space, “FINRA would be the one enforcing [the uniform standard], in most cases,” Donohue said. “And if there are cases, they would be done by arbitration.”

Applying a uniform standard on the advisor side, he continued, would be through “enforcement cases, because there is no private right of action under the Investment Advisers Act.”

In the state regulatory context, enforcing a uniform standard would involve “states bringing individual actions in the states, where … they would be trying to apply, assuming that they had adopted a similar standard, the same standard.”

Said Donohue: “It was hard for me to see, over time, how you kept the standard of care similar, even if it started out exactly the same on day one.”

Robert Plaze, the former co-director of the SEC’s Division of Investment Management, agreed at the PLI event that the SEC pursuing a uniform fiduciary standard would have been “an exercise in futility.”

— Related on ThinkAdvisor:


© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.