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Time Running Out for Trump DOL Fiduciary Rule

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The Labor Department’s proposed fiduciary prohibited transaction exemption to align with the Securities and Exchange Commission’s Regulation Best Interest could be “a dead letter” if Labor fails to send its final version to the Office of Management and Budget this week, according to Brad Campbell, partner at Faegre Drinker in Washington.

Labor “is effectively out of time” to send a final version of its fiduciary class exemption to align with Reg BI to OMB and have it reviewed and published by Nov. 20, said Campbell, the former head of Labor’s Employee Benefits Security Administration, on Faegre Drinker’s Inside the Beltway webcast Thursday.

If Trump published a final rule before Nov. 20 — 60 days before the end of his term — the Biden administration “typically would have to use notice and comment rulemaking to suspend or modify that regulation,” which is a time-consuming process, Campbell said.

If Trump puts a rule on the books less than 60 days before leaving office, President Biden could squash it “basically with a stroke of a pen.”

The Trump fiduciary rule remains up in the air.

“We don’t know what policy decisions they’re going to make because they still haven’t finished writing it,” Campbell said, “but if there’s not a second term of the Trump administration, it’s quite likely that the DOL fiduciary rule, as the Trump administration envisions, is a dead letter.”

As it stands now, Labor “seems to be further behind in finalizing that [fiduciary] rule,” as opposed to its controversial rule on environmental, social and governance focused investments in 401(k) plans, which became final last week.

That doesn’t mean the fiduciary rule issue is dead. “In fact, if there’s a Biden administration, we think it’s very likely that they will pursue, again, a fiduciary regulation which likely would be a combination of actually changing the 1975 regulation in material ways — bearing in mind the objections of the 5th Circuit [Court of Appeals], which struck down the Obama-era” fiduciary rule.

The fiduciary rule is “very much a live issue, no matter who wins,” Campbell said.

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