The Office of Management and Budget’s Office of Information and Regulatory Affairs (OIRA) announced this week that it was effectively approving a delay in full implementation of the Department of Labor (DOL) Fiduciary Rule. After several years of study and comment, the final version of the Rule was originally slated to take effect earlier this year, but was delayed consistent with President Trump’s order to the DOL to further review the Rule’s impact on the cost to the investment industry vs. its efficacy in protecting investors (despite the DOL’s several prior years of study of that precise issue). Pursuant to this action, the Rule is not likely to be fully implemented until at least July 1, 2019, and may be changed or scrapped in the interim.
Some provisions of the Rule – notably the definition of “fiduciary” and the “impartial conduct” standards that require advisors to retirement plans and investors to act in investors’ best interests when recommending products – became effective on June 9, 2017. During the “Transition Period” after June 9 and before the Rule is fully implemented (now July 2019), however, the DOL indicated it will not enforce the Rule for advisors who are attempting to comply in good faith. Of course, the DOL’s position will not stop investors from alleging the impartial conduct standards are now the applicable standards of care for financial advisors in the retirement industry in litigation.
The DOL indicated yesterday that it may delay implementation of the Rule even further. It has received over 60,000 comments already on the impact of delay, and has set a deadline of September 15, 2017 for further comments.
The OIRA approved the additional delay “consistent with change,” which means it has suggested some undisclosed changes to the Rule. The next step is for the DOL and OIRA to conduct closed-door deliberations of proposed changes and reach agreement, a process that carries no deadline and could delay the Rule even further. Meantime, several studies have suggested the cost of delay far outweighs the cost of compliance with the Rule as it now stands, so it is unclear whether even the retirement industry will actually benefit from the additional process.