Department of Labor officials alerted the White House Wednesday that it has completed work on a reworked rule to regulate investment advice to workers and retirees.
No details are available on any changes to the rule. A notice published Wednesday indicated that the rule was sent to the White House Office of Management and Budget for a required regulatory review.
However, it might be too late for the rule to survive. OMB can take up to 90 days to review the rule, during which time the contents remain under wraps. After the agency signs off, the DOL will release the final rule publicly.
But any rules published in the final 60 days of an administration, known as "midnight regulations," can be rescinded by the incoming administration.
While President-elect Joe Biden and his team are likely to have much higher priorities, the Democratic platform released over the summer vowed to reverse Trump administration rules on investment advice.
Former Fiduciary Rule
Known as 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.
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 September 2019 and reportedly was involved in developing the new rules.
The resulting investment advice rule did not completely satisfy the financial services industry.
The Trump replacement has two main parts: a new exemption allowing advisors to provide conflicted advice for commissions; and a reinstatement of the "five-part test" from 1975 to determine what constitutes investment advice.
Among other things, the guidance reverses the longstanding DOL definition of "regular basis" in the context of providing financial advice, legal analysts have said. In striving to make rules consistent for brokers, agents and advisors, the DOL might have created other problems with just who is considered a fiduciary, analysts added.
Consumer advocates do not like the new rule either, but for different reasons.
Barbara Roper is director of investor protection for the Consumer Federation of America. Roper, who testified in writing and during a public hearing, said the rule allows for conflicted investment advice and gives most rollover recommendations a “regulatory free pass."
In comments earlier this month, Roper said she expects a Biden administration will want to rescind the rule to clarify the definition of fiduciary investment advice and the "problematic" five-part test.
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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