The biggest brokerage industry trade association is calling for a longer delay of the Labor Department's fiduciary rule, while a consumer group concludes that that the Trump administration has already decided to revise or repeal the rule.
In a
Feb. 3 memo, President Donald J. Trump told the DOL to update the economic and legal analysis of the rule — which would require financial advisers to act in the best interests of their clients in retirement accounts — and revise or repeal the regulation if it is found to reduce investors' access to retirement advice, increase their costs, disrupt the financial industry or cause an increase in litigation for financial firms.
Monday marked the
deadline for comment letters regarding the topics raised in Mr. Trump's memo.
In its comment letter, the Securities Industry and Financial Markets Association urges an additional delay beyond the 60 days the regulation was already pushed back — from April 10 to June 9 — by the agency on April 7.
"In order to comprehensively and effectively address the key questions in the president's memo, there needs to be additional time," Ira Hammerman, SIFMA executive vice president and general counsel, said in an interview.
He did not say how long a delay SIFMA is seeking. But the letter does outline a way for Mr. Trump's nominee as labor secretary, Alexander Acosta, to extend the delay under rulemaking parameters.
"We need to call a timeout. There is no magic number," Mr. Hammerman said. "It's going to take time."
The Consumer Federation of America said that the review is politically motivated and signaled it might challenge the Trump administration in court.
"[A]lthough we still hope to be proven wrong, the weight of the evidence leads us to conclude that the department has already predetermined the outcome of this reconsideration and expects to revise or replace the rule, regardless of what the reconsideration indicates about the effectiveness and workability of the rule," wrote Barbara Roper, CFA director of investor protection, and Micah Hauptman, CFA financial services counsel, wrote in their
April 17 comment letter. "If true, that would be a gross abuse of process and would subject the department to claims that it acted in an arbitrary and capricious manner."
The CFA said that the integrity of the rule, which the Obama administration said is needed to protect investors from conflicted advice that reduces savings, has been upheld in
numerous court challenges.
"[T]here is strong reason to believe that the real motivation [of the review] is to grant concessions to powerful special interest groups — either an outright repeal of the rule or a fatal weakening of provisions that the department previously determined were essential to effectiveness — concessions that they failed to win in court, in Congress or from the previous administration," Ms. Roper and Mr. Hauptman wrote.
The one saving grace of the delay is that after it concludes on June 9, two major provisions of the rule — expanding the definition of who is a fiduciary to retirement accounts and implementing impartial conduct standards — will go into effect, they wrote.
Mr. Hammerman attributed that twist in the delay rule to DOL "career staff" operating without direction from political appointees, such as Mr. Acosta.
"They are prejudging the conclusion [of the review], and they've said that very key elements of the rule would [become applicable] as of June 9 without further consideration or analysis," Mr. Hammerman said. "That's flouting the clear directive in the Feb. 3 presidential memo."
