FIS Blog

Fiduciary Rule Delay – Mixed Messages and Emotions


Larry Goldbrum | Thursday, February 16, 2017

Over the last few weeks the rumor mill has been hyperactive regarding whether the U.S. Department of Labor’s (DOL) fiduciary rule, also known as the conflicted advice rule, will become applicable as planned on April 10, 2017. The White House, the DOL and Senator Elizabeth Warren all have made statements about the rule, further confusing an already uncertain financial industry.

On Feb. 3, the White House issued an Executive Memorandum directing the DOL to redo its analysis on the impact of the fiduciary rule. Importantly, however, the extension many thought the White House would order didn’t come.

A short time later, the DOL issued a statement that it will “consider its legal options to delay the applicability date as we comply with the President’s memorandum.”

Meanwhile, Senator Warren sent a letter to more than 30 financial institutions asking their views on the rule and whether they were ready for it; she summarized the responses as supportive of the rule and said responding institutions told her they would be ready for the April deadline.

You wouldn’t be alone if you were struggling with the mixed messages, or asking the big question: what will really happen?

The good news is that, while some are still fighting for a repeal and most are hoping for an extension to at last work on their compliance programs, almost all financial institutions already are prepared for the rule. In fact, a significant number of impacted organizations seem to have accepted that a best interest standard is the right thing for retirement plan and IRA investors, even if many such organizations have concerns about the approach in the rule.

Those concerns have resulted in three lawsuits by trade associations and impacted companies, each asking the courts to block the rule from going into effect on April 10. To date, each of the cases has been decided in favor of the DOL and such attempts to delay the applicability date appear to have failed.

So with the clock ticking and the regulated community continuing to devote time and resources to preparing to comply, where do things stand? On Feb. 9, the DOL submitted to the Office of Management and Budget (OMB) a proposal to delay the April 10 applicability date. Little is known about the details of the proposal but it’s anticipated that it will grant a 180-day extension.

That said, it’s very important to consider when the extension will be official. OMB can take up to 90 days to complete its review. After that review period, the proposal is then released for public comment (usually for 15 days) before it can become final. Under such a timetable, however, the rule would become applicable before the extension could become official – totally counterintuitive to the intended goal.

The bottom line is that it is probable a 180-day extension is forthcoming. But that’s far from certain, as of the writing of this piece. Given the political climate in Washington, D.C., and the conflicting views about the rule, little will be certain until everything is official. In the meantime, the regulated community must continue to monitor this matter closely, and hedge its bets about how much time, money and resources must be devoted to preparing for April 10.

The information included herein is intended for general informational and educational purposes only. Such information is not intended as investment, legal or tax advice to anyone, and should not be relied upon as such. We encourage you to evaluate such information with your own advisors and legal counsel.
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Tagged in: Fiduciary Rule, Conflicted Advice Rule, Fduciary Rule Extension, Institutional and Wholesale

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