Industry watchers expect the Department of Labor to publish a final version of its investment advice rule any day now -- but the regulation's 10-year saga is far from over.
Publishing the final rule soon makes it much harder for a Joe Biden administration to pivot away from it.
But even if the president wins a second term, DOL rule opponents, of which there are many, still have avenues to kill the regulation, said Ben Norquist, president and CEO of Convergent Retirement Plan Solutions.
Norquist spoke during a webinar, titled "The DOL Rule: Back to the Future?", sponsored by LIMRA Wednesday.
The investment advice rule would replace the controversial 2016 fiduciary rule published by the Obama administration. 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.
Two Routes To Defeat
Norquist noted two laws that will give opponents a post-election chance to waylay the investment advice rule:
The Congressional Review Act. The DOL rule is one of dozens of Trump administration rules and regulations that could be reversed under the CRA. In an ironic twist, the Congressional Review Act had been a little-used legislative tool until Trump was elected in 2016.
The CRA gives Congress a short window to review and overturn federal rules. From 1996 to 2017, the act was used once, to overturn the Clinton administration’s workplace ergonomics rule in 2001. In the first months of 2017, however, a Republican-led Congress joined the Trump administration to nullify sixteen rules issued at the end of the Obama administration.
If the Democrats take control of the Senate, Norquist said, the CRA could be in play as a strategy to quickly make the investment advice rule go away.
The Administrative Procedure Act. The APA has more of a history, having been adopted in 1946. It establishes the procedures for the government to follow in proposing and establishing rules and regulations.
While the Labor Department might not have explicitly violated any APA provisions, Norquist said, their actions fall well short of recently established precedent. For example, the 30-day public comment period on the rule paled in comparison to the 90-day comment period the DOL permitted for the 2016 rule.
"So we're talking one-third of the time," Norquist said. Likewise, the agency gave very little time for participants to prepare for a public hearing held in September.
"Even those that essentially agree with the general trajectory of the exemption, some financial services, you saw pushing back on the accelerated timeframe and the rapid turnaround requirements for hearings," Norquist said.
'So Many Concerns'
The attempt to finalize a rule governing financial advice and the sale of products using tax-qualified retirement dollars dates to 2010, when the Obama administration put out its first rule version. That rule was pulled back in favor of the 2016 rule, which was tossed out by a federal appeals court two years later.
The Trump administration rule is not universally popular either. Industry critics say it reinterprets the 1975 five-part test in a way that could turn some simple insurance transactions into fiduciary advice. Consumer advocates don't like it either, claiming it allows more conflicted advice for commissions.
It is this lack of support that has Norquist believing that more changes are on the way.
"At the end of the day, you've got so many concerns expressed by both entrenched groups, the consumer advocacy groups and the financial services industry, that we're likely to see some substantial change before this ever gets finalized," he said. "What trajectory that takes I would say to a great extent depends on what happens in November elections."
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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