Getting staff in place at the Employee Benefits Security Administration will speed up the process of amending the controversial fiduciary rule, analysts agreed today.
Preston Rutledge, a high-ranking Senate Finance Committee official, is expected to be appointed to head EBSA, an agency within the Department of Labor.
“That would be an important step forward in this process,” said Bradford P. Campbell, a partner at Drinker Biddle & Reath, which hosted a webinar update on regulatory issues.
If confirmed by the Senate, Rutledge would fill an assistant secretary position vacant since Phyllis Borzi resigned in January. She is considered the architect of the fiduciary rule.
“I think Preston Rutledge is pretty well respected and that could enhance the process going forward,” said Fred Reish, partner with Drinker Biddle.
There are another “handful” of key positions below the assistant secretary that have been vacant for months. Those staffers will do the work compiling data and assessing the impacts of the fiduciary rule – crucial work that could support changes desired by the industry.
“There’s nobody there,” Reish said. “There is a complete vacuum of political leadership that can be traced back to the White House.”
Phase one of the DOL fiduciary rule took effect June 9. It requires advisors and agents to act as fiduciaries, make no misleading statements and accept only “reasonable” compensation.
Phase two of the rule is expected to be delayed until July 1, 2019. A rule finalizing that delay could be published any day in the Federal Register.
Phase two deals with exemptions, which regulate the sale of annuities sold with retirement funds. In particular, the Best Interest Contract Exemption, which requires a financial institution to accept liability for each contract and gives clients the right to sue over investment advice.
“I think it’s a pretty safe bet that the lawsuit provisions will be taken out by the Trump administration. Beyond that, that’s where I think we need to pay attention,” said Campbell, who served as assistant secretary in charge of EBSA under President George W. Bush.
Other Avenues to Change
The Securities and Exchange Commission is discussing a fiduciary standard and has been collecting comments for weeks. Work there will be divided between the Division of Investment Management and the Division of Trading and Markets, explained James G. Lundy of Drinker Biddle.
“They see the world very differently,” said Lundy, noting that one division focuses on the broker/dealer industry, while the other focuses on investment advisors. “They have different approaches.”
At any rate, the SEC is waiting for two commissioner spots to be filled and will move slowly, he added. An SEC fiduciary proposal should not be expected before next spring at the earliest, Lundy said.
“Chairman (Jay) Clayton will want a full commission in place to assess any proposed rule,” he said.
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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