The Department of Labor continues to post comments and petitions it received on its proposal to delay the controversial President Obama-authored fiduciary rule by 60 days.
The comment period closed March 17 and the DOL sent its delay rule to the Office of Management and Budget Wednesday.
As of Friday morning, the DOL reported 1,105 comments and 24 petitions. Perhaps the most interesting comment letter came from Bradford P. Campbell and Bruce L. Ashton, lawyers with Drinker Biddle & Reath in Los Angeles.
They wrote in support of the delay, but for different reasons than other commenters. The pair represents several insurance or field marketing organizations seeking “financial institution” status under the rule.
Failure to delay the rule will single out IMOs and FMOs in particular, Ashton and Campbell wrote .
The DOL issued a March 10 bulletin indicating that it will not be enforcing the fiduciary rule in the short term. Still, the attorneys wrote, that is of little solace to IMOs/FMOs if the fiduciary rule takes effect even for short time.
“It would make it impossible for insurance intermediaries that do not meet the definition of a financial institution under BICE to serve their clients without engaging in a prohibited transaction,” the letter read.
The BICE (Best Interest Contract Exemption) is needed under the rule to sell variable and fixed indexed annuities. It requires a financial institution to oversee the transaction.
Out of the Loop
The fiduciary rule designates four entities as financial institutions: banks, insurance companies, broker/dealers and registered financial advisors. That leaves IMOs/FMOs out of the loop for the moment.
The DOL is trying to fix this with a blanket exemption for marketing organizations that can meet its requirements. Marketing organizations object to the exemption requirements set forth by the DOL, namely that companies must average at least $1.5 billion in premiums over each of the three previous fiscal years.
Of the 22 IMO financial institution applications pending before the DOL, only seven meet that standard. The Drinker Biddle attorneys urged the DOL to use the delay to fix its exemption, and adopt an even longer delay to address the overall fiduciary rule.
“This is not a hypothetical concern,” the letter assured the DOL. “Because there is no reasonable exemption for insurance intermediaries, the effect of the fiduciary rule becoming applicable would be to put out of business a vital segment of the insurance industry.”
Barring unforeseen circumstances, the OMB is expected to publish the 60-day delay in the Federal Register in the coming days.
Ashton and Campbell represent The Annuity Source, Brokers International, C2P Advisory Group, Financial Independence Group, Ideal Producers Group, InsurMark, Kestler Financial Group and Legacy Marketing Group.
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].
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