Filed Under:Agent Broker, Agency Management

Trump administration seeks further delay in parts of broker fiduciary rule

If this proposal is approved, firms would have until July 2019 to make adjustments to the most contentious parts of a rule that they say could open them up to a wave of lawsuits. (AP Photo/Manuel Balce Ceneta)
If this proposal is approved, firms would have until July 2019 to make adjustments to the most contentious parts of a rule that they say could open them up to a wave of lawsuits. (AP Photo/Manuel Balce Ceneta)

(Bloomberg) -- The Trump administration is moving to further delay part of an Obama-era rule to require brokers who offer retirement advice to put their customers’ interests ahead of their own.

18-month postponement


The U.S. Department of Labor said in a court filing Wednesday that it has submitted to the Office of Management and Budget a proposal to postpone parts of the so-called fiduciary rule for an additional 18 months. If approved, Wall Street firms would have until July 2019 to make adjustments to the most contentious parts of a rule that they say could open them up to a wave of lawsuits.

Related: Fiduciary rule causes insurers to pull back on financial products

The Labor Department measure, the first major overhaul of retirement savings rules since the 1970s, was released last year over strong objections from the financial industry and Republican lawmakers. President Barack Obama’s administration said at the time that requiring brokers to put customers first would help eliminate biased advice that costs retirement savers billions of dollars annually in high fees and commissions.

Financial firms and industry groups have argued that the new rules would prompt brokerages to drop clients with small amounts of savings and limit customers’ investment options. The U.S. Chamber of Commerce and other groups have sued to overturn the fiduciary standard, which they’ve termed “deliberately unworkable.” A delay could help financial firms by giving regulators time to make tweaks to the rule that the industry would like to see.

Sets stage for substantial rewrite


“While this delay was widely expected, it is a positive for the industry nonetheless,” said Issac Boltansky, an analyst at Compass Point Research & Trading. “This delay sets the stage for a substantial rewrite.”

The industry fought especially hard to tweak what’s known as the best interest contract exemption, which allows clients to join together in class-action lawsuits against financial firms.

Bulk of provisions took effect in June


President Donald Trump set his sights on the fiduciary rule early in his presidency by signing an executive order in February to delay its implementation. While Wall Street firms had hoped that action would lead to the rule being scrapped, Labor Secretary Alexander Acosta disappointed them earlier this year when he said the rule would be implemented. As a result, the bulk of the provisions took effect in June. Others were delayed until January 2018 and now could be further delayed to July 2019.

“The regulation is already harming retirement savers,” James Szostek, a vice president at the American Council of Life Insurers, said in a statement Wednesday. “The department needs to act as quickly as it can to reverse course to correct this regulation.”

'Realistic timeframe'


The delay plan was disclosed in documents submitted by the Labor Department as part of a lawsuit filed in Minnesota. Three provisions of the fiduciary rule, including the part permitting class-action suits, are currently set to take effect in January.

Related: Will proposed fiduciary rule make insurance agents vulnerable to lawsuits?

“Given the importance and implementation requirements, we recognize the regulated community will need time to make the changes necessary to be compliant with the remaining requirements,” Laura Edling, a spokeswoman for Vanguard Group, said in a statement. She said Labor should delay the rule to allow a realistic timeframe for financial institutions to comply with the outstanding provisions.

Copyright 2017 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Related

Trump tells DOL to halt fiduciary rule; Dodd-Frank targeted

President Trump today signed a directive telling the DOL to halt implementation of its fiduciary rule, which is set to...

Featured Video

Most Recent Videos

Video Library ››

Top Story

6 behaviors that could spawn a sexual harassment lawsuit

Sexual harassment scandals loom large among the events that shaped 2017.

Top Story

2017's 10 most hazardous toys

The Boston-based nonprofit World Against Toys Causing Harm, Inc. (W.A.T.C.H.) has released its annual list of the 10 worst toys of 2017.

More Resources

Comments

eNewsletter Sign Up

Agent & Broker Insider eNewsletter

Proven success tips and essential information to help agents and brokers grow their practice – FREE. Sign Up Now!

Mobile Phone

Advertisement. Closing in 15 seconds.