The Office of Management and Budget is taking a more measured approach to reviewing the Department of Labor's request for a delay of its controversial fiduciary rule.
The delay was expected to be finalized this week by OMB, but several sources said the office is concerned that pro-rule groups will sue if the rule delay is not thoroughly vetted.
"It would not be a surprise at all if that’s what follows," Knut Rostad said of the counter-lawsuit potential. Rostad is co-founder of the pro-rule Institute for The Fiduciary Standard.
OMB received the delay request Feb. 9. It has since been meeting with primarily pro-rule groups such as AARP. In his first action on the DOL rule, President Donald J. Trump directed the DOL to seek a delay to assess whether the rule harms consumers.
The DOL rule is set to begin taking effect April 10, but sources say the DOL asked OMB to approve a 180-day delay.
The DOL delay request can take two forms, a proposed rule or an interim final rule. The biggest difference is the timing of required public comment.
A proposed rule requires public comment before it can be published, while an interim final rule can be published first, with comment taken afterwards, said Erin M. Sweeney, a lawyer with Miller & Chevalier in Washington, D.C.
"I have heard that OMB is carefully considering potential litigation, but I still understand the request is being fast tracked," Sweeney said Friday.
The pro-rule Consumer Federation of America met twice with OMB. Barbara Roper, director of investor protection for the organization, said it is "premature" to talk about legal challenges.
"Obviously, we are watching to ensure that the department is as scrupulous in meeting its legal obligations as part of this reconsideration as they were in adopting the rule," she said via email.
Extending the applicability date will give the Trump administration DOL more time to change the rule to its liking. The fiduciary rule extends a best-interest standard of care to anyone investing or doing financial planning with retirement dollars.
Industry opponents say the rule comes with so many added costs that advisors will not be able to service the small savers who need advice the most.
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected].