Fiduciary delay to prolong already lengthy debate
The Department of Labor's proposed 18-month delay of the fiduciary rule's remaining components will go into effect, pushing the implementation date to July 1, 2019, the agency said Monday.
The move, which prevents the rule's enforcement provisions from taking effect, will prolong an already protracted debate over what standard advisors should be held to and which government agency should oversee it.
The Labor Department's action allows it to complete a review of the rule that President Trump ordered in February. Other aspects of the regulation have been in effect since June.
Secretary Alexander Acosta told lawmakers that the department will pursue actions against advisors and firms for egregious best-interest advice violations.
Harmonizing a potential SEC regulation with that of the Labor Department is tricky business, experts say.
Speaking to hundreds of industry executives, Jay Clayton said his agency can't simply supplant the Department of Labor.
SIFMA, which was part of a lawsuit to stop the fiduciary rule from going into effect, welcomed news of the delay and repeated calls for the SEC to take the lead on developing a "principles-based standard of conduct for the benefit of investors."
FSI, also party to the same lawsuit, said it was encouraged by the delay and the regulatory review, which will allow the Labor Department "to ensure investor choice and access to retirement savings advice is protected," Dale Brown, CEO and president, said in statement.
The SEC has said it is looking at whether to craft its own standard. The agency has been authorized to create a fiduciary rule since Dodd-Frank passed in 2010, but former Chairwoman Mary Jo White repeatedly said that overstretched resources and divisions between commissioners prevented the SEC from moving forward.
In October, White's successor, Jay Clayton, warned industry executives at a SIFMA conference of similar constraints, saying there was "no silver bullet."
Fiduciary advocates, meanwhile, have been fighting something of a rearguard action to defend what they say is a necessary investor protection. Consumer groups were quick to decry the latest move by the Trump administration, seeing in it a plan to ultimately kill the fiduciary rule.
"It renders the rule toothless and will wind up costing millions of Americans billions of dollars, denying them a safe and secure retirement. Even worse, the 18-month delay is nothing more than another step in the Trump administration’s long-term plan to permanently gut the rule or destroy it outright. Once again, the administration has chosen to side with the financial industry over Main Street consumers," Stephen Hall, legal director and securities specialist for Better Markets, said in a statement.