Department of Labor officials alerted the White House Monday that is has completed work on a reworked rule to regulate investment advice to workers and retirees.
Known the "DOL fiduciary rule" when proposed by former President Barack Obama's DOL, an appeals court tossed out the rule in 2018. But parts of the rule had already taken effect, which left the financial services industry in a limbo of sorts.
No details are available on the new rule. A notice published Monday indicated that the rule was sent to the White House Office of Management and Budget for a required regulatory review.
The Labor Department was expected to complete the new rule in late 2019. Those plans went awry when former DOL Secretary Alexander Acosta resigned. Secretary Eugene Scalia was confirmed in late September and reportedly was involved in developing the new rules.
Representing the U.S. Chamber of Commerce, Scalia played a major role in convincing an appeals court judicial panel to vacate the Obama version of the rule.
In a late-August webinar, Drinker Biddle & Reath partner Joshua Waldbeser said he expected the reworked DOL rule to be much less stringent.
Citing "good, credible rumors," Waldbeser said the DOL would likely return to rules set out in the 1975 "five-part test" to determine whether financial advice to plans and participants meets a fiduciary standard.
"But there will be some changes around the fringes and probably the most likely candidate is changes to rollover recommendations," he explained. "What we know for sure though is they’re going to have to come out with some new exemptions to replace (the best interest contract exemption) and so on because we can’t live under the transition relief forever."
The best interest contract exemption was part of the DOL fiduciary rule and attached heavy liability to the sales of products such as variable annuities. Critics claimed the Obama rule represented an attempt to wipe out commission sales.
New rules are expected to be a return to the past, Waldbeser said, and allow commissions and conflicted compensation. Rollovers are an area creating "a lot of confusion" at the moment and could end up a place of "enforcement emphasis" with new rules, he added.
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]. Follow him on Twitter @INNJohnH.
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