In response to President Trump’s demand that the Department of Labor ( DOL ) restudy its proposed fiduciary rule - which could lead to revision of or killing the rule - DOL took the first step along that path on Thursday.
The DOL officially notified the Office of Management and Budget (OMB) that it wants to delay implementation. That will allow time for a new study.
The rule would require brokers and advisors to recommend investments that are in the best interests of clients, not merely suitable for them, when they give retirement account advice. That is how fiduciaries are obligated to act. As a result, the new rule would require brokers and advisors to put their clients’ best interest before their own profit.
DOL can begin its restudy and new rulemaking process as soon as its Notice of Proposed Rulemaking is approved by the OMB. That typically takes 10 to 14 days, but OMB may fast-track this issue.
“My understanding is that the proposal has been precleared with OMB such that the review should be faster,” said Jean-David Larson, director, regulatory & strategic initiatives at Russell Investments. “That means it can go back to the DOL for publication early next week.”
Once OMB approves the new rulemaking process, DOL would typically send its notice to the Federal Register for publication within a day. That starts the rulemaking process, which will likely spell out how long the delay in implementation of the current April 10 date will be.
Larson expects the delay to be 180 days, which would be the length of a typical rulemaking process. “As you know, the memorandum (signed by Trump) . . . last Friday omitted the 180-day delay language and only directed the DOL to conduct a review of the fiduciary rule. Presumably, the proposed delay will afford the DOL adequate time to conduct its review, at the conclusion of which the DOL will release a proposal to either amend the rule or rescind it.”
DOL filed its notice of delay a day after a Texas federal judge ruled in favor of DOL in a case brought by nine plaintiffs.
It was the third court victory for the DOL fiduciary rule.
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