As far as we know, Donald Trump never specifically mentioned the Department of Labor fiduciary rule during his 17-month campaign for president.
That hasn’t stopped plenty of would-be surrogates from stepping up to speculate on what he will do with the rule after his Jan. 20 inauguration. DOL rule opponents have been energized over the days since Trump’s surprising victory over Hillary Clinton.
Yet, insurance companies and insurance marketing organizations (IMOs) who have spent millions to comply with the rule mandates say they will continue those efforts.
And Chip Anderson, executive director for the National Association for Fixed Annuities, said his group is not backing off plans to appeal a court decision favoring the DOL rule. NAFA asked the District of Columbia District Court for a preliminary injunction, which was denied days before the election.
So what is going to happen? A sampling of analysts and political strategists favors the rule being defeated.
“I would guess very quickly, maybe even on the first day or two of the next Congress, you will see both the House and Senate repass legislation to repeal the fiduciary rule,” said Michael Lewan, former chief of staff to Sen. Joseph Lieberman, D-Conn.
Others are not so sure.
“It’s a little too early to tell since this wasn’t a huge part of the campaign,” said Brigen L. Winters, a principal at Groom Law Group in Washington, D.C. “It opens up some avenues for changes or potential changes.
“A Trump administration is a bit of a wild card on what he’ll do on certain issues like this one and we don’t know who he’ll put into the Department of Labor.”
So what can a President Trump and House Speaker Paul Ryan do in collaboration to reverse the DOL rule? They appear to be limited to three options, none of them particularly easy.
One issue is timing. The Obama administration published its rule on April 6, a strategic move that put it out of the eight-month reach of the Congressional Review Act. Otherwise, the new administration could partner with Congress to pass a filibuster-proof CRA overturning the rule.
One thing the Trump administration can do is suspend the effective date of the rule, which is slated to begin taking effect April 10, 2017. A suspension will enable Republicans in the administration and Congress to decide on a course of action.
The three options include:
1. Legislation: House Republicans have Finance Committee-approved legislation ready to go, gutting both the fiduciary rule and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
Democrats can still block legislation in the Senate by filibustering. Given how active Sens. Elizabeth Warren, D-Mass., and Bernie Sanders, I-Vt., are on financial protection issues, the legislation route could be a tough one.
The Financial CHOICE Act passed in a September party line vote by the House Finance Committee. Among the many changes the bill proposes, it would block the DOL from implementing its fiduciary rule by incorporating into the Retail Investor Protection Act, which passed the House last year.
Introduced by Rep. Ann Wagner, R-Mo., the RIPA requires the Securities and Exchange Commission to move first on fiduciary rulemaking before the DOL can act.
The bill eliminates several Dodd-Frank provisions, including federal "bailouts" and the Volcker Rule, which restricts trading activities at banks.
Under CHOICE -- which stands for Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs -- the Financial Stability Oversight Council would no longer be able to designate risky non-banks and others as “systemically important financial institutions."
The FSOC was created by Dodd-Frank to review the systemic risk to the capital markets presented by large, global financial institutions. Large insurers such as MetLife have fought the designation.
The FSOC’s authority to break up a large financial institution if the Federal Reserve finds that the firm “poses a grave threat to the financial stability of the United States” would also disappear if the bill is passed.
Perhaps most controversial, the bill would require the Consumer Financial Protection Bureau to be subject to bipartisan oversight and congressional appropriations.
2. Regulation: The new administration could adopt new rules that reverse the impending fiduciary rules. But to do so means following an arduous process of notification and public hearings and publication. And courts have ruled against similar efforts in the past.
Notably, a 1983 Supreme Court decision struck down an order by the National Highway Traffic Safety Administration rescinding regulations requiring either airbags or automatic seat belts in new cars.
3. The Courts: Opponents could wait and see if the courts strike down the fiduciary rule, which would enable the new administration to expend political capital elsewhere.
Four cases are ongoing in federal district courts in four different states. Among those, the Market Synergy vs. Department of Labor case in Kansas District Court seems to be opponents' best shot at winning an injunction.
Judge Daniel Crabtree presided over a Sept. 21 hearing in that case, but has yet to rule. Additional hearings in the remaining two cases are set for Nov. 17 in Dallas and March 2 in St. Paul.
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at firstname.lastname@example.org.
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