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DOL Fiduciary Rule Hangs in Balance as Labor Secretary Acosta Resigns

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Labor Secretary Alexander Acosta is resigning his post due to pressure over his handling of the sex trafficking case against hedge fund manager Jeffrey Epstein.

Acosta and President Donald Trump appeared at the White House Friday morning to announced Acosta’s resignation.

In a statement on Monday, Acosta reiterated that he was “pleased” that “the New York prosecution is going forward,” referring to Epstein being arrested by federal authorities on Saturday and charged with the sex trafficking of minors. The new charges against Epstein, “who’s now a registered sex offender,” Acosta said, “are a very, very good thing.”

U.S. District Judge Kenneth A. Marra of the Southern District of Florida ruled in late February that prosecutors — including Acosta — broke federal law in their handling of a case against Florida billionaire Epstein, who ran a global child sex ring between 1999 and 2007.

Acosta’s departure could delay the release of a new fiduciary rule by Labor.

Trump announced Friday morning that Patrick Pizzella, Acosta’s deputy, will serve as the acting Labor secretary. Pizzella was confirmed to serve as deputy Labor secretary in April 2018, and previously served as a member of the Federal Labor Relations Authority under President Barack Obama.

Acosta’s resignation “will affect the development of any guidance that could be controversial or that could have significant consequences,” said Fred Reish, partner at Drinker Biddle.

Labor employees “will continue to work on regulations and other guidance,” Reish said. If Acosta’s replacement “has an anti-regulatory approach, we may not see a new fiduciary regulation during this administration.”

Labor’s spring regulatory flexibility agenda said Labor would issue a notice of proposed rulemaking regarding a new fiduciary rule in December.

An earlier unveiling of a Labor fiduciary plan could be likely given the Securities and Exchange Commission’s passage of its advice standards package, including Regulation Best Interest, on June 5.

Labor Secretary Alexander Acosta told lawmakers on May 1 that Labor was collaborating with the SEC as it worked on its advice-standards package, and that “based on our collaborative work, we will be issuing new rules in this area.”

Preston Rutledge, head of Labor’s Employee Benefits Security Administration, said on June 3 that Labor’s upcoming fiduciary rulemaking would align with Reg BI.

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