DOL Puts Fiduciary Rule Enforcement on Hold
The industry may be wondering what’s next in the wake of last week’s federal court decision vacating the fiduciary rule — but, for now anyway, the Department of Labor (DOL) says it is taking a pause.
In response to press inquiries, a DOL spokesperson said, “Pending further review, the Department will not be enforcing the fiduciary rule.”
The review, of course, is of the aforementioned 2-1 decision
from the U.S. Court of Appeals for the 5th Circuit. Though it was the first loss in court for the Obama-era regulation, it has drawn the attention (and hope?) of many who have sought to overturn the regulation and/or blunt its impact. While the 10th Circuit had just ruled
in favor of a narrow sliver of the best-interest contract (BIC) prohibited transaction exemption (PTE) involving fixed indexed annuities, a similar case to the one in the 5th Circuit is currently pending in the D.C. Circuit Court of Appeals, having delayed its proceedings until the 5th Circuit issued its decision.
After a long period of talk, and no apparent action, the Securities and Exchange Commission (SEC), with a new Chairman and new commissioners, has revitalized its potential involvement in the development of its own fiduciary rule. Published reports have indicated that the SEC hopes to propose its rule as soon as the second quarter of 2018, though the relatively recent appointments of Robert Jackson and Hester Peirce as new SEC commissioners, might delay things a bit.
While it seems an outlier as far as realistic prospects for an alternative outcome, House GOP lawmakers have (repeatedly) sponsored legislation that would block the rule and implement an alternative fiduciary standard.
Not that the DOL’s current “review” stance resolves the potential uncertainty. As actions in Massachusetts (not to mention rumored inquiries of interest from other jurisdictions) prove that litigation could arise from sources other than the DOL. Moreover, amidst the uncertainty regarding the future of the fiduciary rule, some states — Nevada already, and Maryland — are taking steps to fill the perceived gap.
Of course, it was more than a year ago that President Trump signed an administrative memorandum to the Secretary of Labor that directs the department to take necessary actions to review the rule and decide if it should be rescinded or revised, calling for an updated economic and legal analysis. An order that, ironically enough, had as a focus whether the fiduciary rule was “…likely to cause an increase in litigation and an increase in the cost of retirement services.”
But for the moment, looks like it won’t be just the DOL who will be reviewing the decision and considering next steps.