The U.S. Department of Labor’s amended “investment advice” fiduciary rule need no longer ask for whom the bell tolls. It tolls for thee.1 So - ding dong, the rule is dead.
We have previously discussed in our May 2018 NewsFlash, Ding Dong - The Amended Fiduciary Rule Is (Almost) Dead, the impending demise of the rule. Our OnPoints on the rule, its path to applicability, and the twists and turns that got us to this point are collected on our Fiduciary Rule Resource Page.
Now, the amended rule is, finally, a once and former rule. The Fifth Circuit, in the case of Chamber of Commerce v. U.S. Department of Labor, vacated the amended rule (including the related new and amended exemptions). The deadline for the filing of an appeal by the United States with the Supreme Court has now come and gone. With respect to this regulatory initiative: game over; done; finis. (We note, however, that the procedural step of the issuance of a mandate by the clerk effectuating the vacatur has not (to our knowledge) yet issued, and so this chapter of the story is not yet truly technically over.)
Attention will now turn to how the market reacts to the elimination of the amended rule. It is not immediately clear that things will simply return to the “status quo ante,” and there have been a number of both legal and commercial developments that have arisen in response to the amended rule. Clicking one’s heels and returning to Kansas (if we may return to Oz for just another moment) might be nice in theory, but, in light of changes that have developed over the course of this process, Kansas may indeed not be Kansas anymore.2
Thus, it seems likely that the response to the demise of the rule will not be one-size-fits-all. Reactions may depend heavily upon, for example, the size of the institution, the specific business of a given market participant, how precisely the institution interacts with retirement assets, how the institution reacted to the amended fiduciary rule before its demise and the institution’s position in the overall product/service demand-and-supply chain. Market participants may also need to consider how best to adjust and pivot to address not only the evolving legal developments but also competitive pressures and client expectations.
Separately, the SEC has issued its proposed “best interest” and related regulations,3 which will need to be taken into account as institutions give consideration to life after the death of the amended rule. In addition, several state and industry-related initiatives have the potential of making commercial and legal planning a continuing challenge, especially to the extent they wind up creating a patchwork of overlapping and conflicting regimes.