Labor Department headquarters in Washington. (Photo: Mike Scarcella/ALM) Labor Department headquarters in Washington. (Photo: Mike Scarcella/ALM)

The Labor Department has sent its fiduciary rule to align with the Securities and Exchange Commission’s Regulation Best Interest to the Office of Management and Budget for review.

Preston Rutledge, assistant secretary of Labor for the Employee Benefits Security Administration, who was charged with spearheading a new fiduciary rule to align with Reg BI, left his post at the end of May.

Oral arguments were heard Tuesday by the U.S. Court of Appeals for the 2nd Circuit in the case brought against Reg BI by XY Planning Network, seven states and the District of Columbia.

Reg BI’s effective date is June 30.

Fred Reish, partner at Faegre Drinker Biddle & Reath in Los Angeles, told ThinkAdvisor in a Tuesday email that word on the street is that the Labor rule “is primarily a prohibited transaction exemption intended to replace the Best Interest Contract Exemption, which was vacated by the 5th Circuit Court of Appeals, and the temporary non-enforcement policy that provided relief in light of the BICE being vacated.”

Reish has also heard that “the fiduciary regulation may be modified to more clearly apply to advisors who are not covered by the SEC’s Regulation Best Interest or the RIA fiduciary standard. It’s not clear how that will be done or what other changes will be made to the ERISA fiduciary definition.”

Brad Campbell, former head of EBSA who’s now a partner at Faegre Drinker, told ThinkAdvisor in a previous interview that Rutledge’s departure won’t result “in any additional delay to current outstanding projects at EBSA, given the strength of his deputy, Jeanne Wilson, and the importance of the agency’s mission to current events.”

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