New Administration Moves Toward Repealing or Revising the Department of Labor's Fiduciary Rule
On February 3, 2017, the President issued a Presidential Memorandum to the Secretary of Labor that sets the stage for the likely repeal or revision of the Fiduciary Rule. The Fiduciary Rule, adopted by the Department of Labor (DOL) on April 8, 2016, unless revised or repealed, would significantly expand the fiduciary status of financial advisors and others under the Employee Retirement Income Security Act of 1974, as amended (ERISA) for ERISA plans and certain non-ERISA plans and individual retirement accounts. Unless a delay is announced by the DOL, many of the complex requirements of the Fiduciary Rule begin to apply on April 10, 2017. The Presidential Memorandum directs the DOL to examine the Fiduciary Rule to determine whether it "may adversely affect the ability of Americans to gain access to retirement information and financial advice" and to prepare an updated economic and legal analysis of several listed considerations. If, following this analysis, the DOL concludes that the Fiduciary Rule is inconsistent with the Memorandum's stated priority of the Administration "to empower Americans to make their own financial decisions, to facilitate their ability to save for retirement and build the individual wealth necessary to afford typical lifetime expenses, such as buying a home and paying for college, and to withstand unexpected financial emergencies," then the DOL is directed to publish for notice and comment a proposal rescinding or revising the Fiduciary Rule.
Drafts of the order that became public initially included a delay of the Fiduciary Rule's April 10 applicability date. However, the Presidential Memorandum does not, by its terms, delay, or require the DOL to delay, the April 10 date. The acting Secretary of Labor subsequently issued a statement that the DOL will consider its legal options to delay the applicability date of the Fiduciary Rule as the DOL complies with the Presidential Memorandum. It is expected that the DOL will act to delay the applicability date, whether by issuing a proposed rule for notice and comment or otherwise, but the timing of this action is unknown.
The Fiduciary Rule has been highly controversial and is the subject of various challenges in court cases and pending legislation. One pending bill, the proposed Financial CHOICE Act, would provide that the Fiduciary Rule has no force and effect and preclude the DOL from issuing a new fiduciary rule until 60 days after the Securities and Exchange Commission issues a final rule relating to standards of conduct for brokers and dealers.
While it is anticipated that the DOL will act to delay the April 10 applicability date, at this time the details regarding next steps for the Fiduciary Rule are not yet known due in part to the nominee for Secretary of Labor not yet having been confirmed by the Senate.