On April 27, 2017, the Senate confirmed Alexander Acosta as the new Secretary of Labor, and on May 2nd, the Senate confirmed Jay Clayton as SEC Chairman. With Trump’s nominees for the respective positions now in place, some insiders expect to see a unified approach on a fiduciary standard rule.

After all, the Dodd-Frank Act of 2010 gave the SEC – not the DOL – the authority to promulgate rules to provide a fiduciary standard of conduct for broker-dealers. But, when the SEC failed to act on this authority, the DOL stepped in and enacted its own Fiduciary Duty Rule for retirement investors.

Currently, that DOL Fiduciary Duty Rule is scheduled to go into effect on June 9, 2017.

Will it still?

The same day he was approved by the Senate as DOL Secretary, Acosta received a letter signed by 124 Congressional Republicans urging him to further delay implementation of the Fiduciary Duty Rule and eventually kill it. The letter called the issue an “urgent need” and echoed the concerns of financial industry groups who warn of the Rule’s negative impact on the retirement industry.

And on the SEC side, then-acting SEC Chair Michael Piwowar blasted the DOL Rule back on March 2, and suggested that the SEC should be taking the lead on the development of a standard of conduct. “I think it is a terrible, horrible, no good, very bad rule,” Piwowar said at the Investment Adviser Compliance Conference in Washington. “For me, that rule was never about investor protection. It was about enabling trial lawyers to increase profits.”

Piwowar followed up on April 21:

“We have an opportunity, with a changeover in administration now, for the SEC to reassert its role in this space,” Piwowar said at a Mutual Fund Directors Forum Conference in Washington. “That’s something that I look forward to having discussions [about] with the new chairman.”

Piwowar suggested “taking a step back” and perhaps using the 2008 results of the RAND study that the SEC commissioned as a starting point for the renewed discussion. The RAND study found that retail investors generally had difficulty understanding the distinctions between investment advisers and broker-dealers, including their duties of care, the titles they use, the services they offer, and the fees they pay for those services.

Some industry insiders urge that the DOL should step aside and defer to the SEC – as the SEC has over 80 years of experience on the subject and began the rule-making process back in 2007 by commissioning the Rand Study.

So, what will Acosta and Clayton do? The text of the DOL’s Delay Rule, which was issued on April 7, suggested very strongly that the DOL intended to allow the extended June 9, 2017 applicability date for the Fiduciary Duty Rule to go forward. Our blog post analyzing the Delay Rule is here.

And yet some insiders expect Acosta to assert his new role by further delaying the Rule or even taking steps to rescind it.

Ultimately, given how unpredictable the process has been to date, financial institutions and advisers would be wise to prepare for the DOL Rule to go forward as scheduled on June 9. Given that the DOL has explicitly said it expects firms to “implement procedures to ensure that they are meeting their fiduciary obligations” as of June 9, it would be risky to assume that, whatever they ultimately do, the new DOL Secretary or DOL Chair will act quickly enough to prevent those “fiduciary obligations” from taking effect on June 9.