President Donald J. Trump is expected to sign an order today to delay the controversial Department of Labor fiduciary rule.
Likewise, the president will order a review of the 2010 Dodd-Frank legislation that tightened regulation of banks and the financial services industry.
Introduced in 2015 after a similar 2010 effort failed, the fiduciary rule imposes a fiduciary standard of care on financial advisors dealing with retirement accounts, are necessary to protect retirement investors from high commissions.
Critics say the DOL is trying to force the industry to move from a commission- to a fee-based model. The rules are scheduled to begin taking effect April 10, 2017.
The moves today signal the Trump administration's intention to free up the financial system to operate free of regulatory oversight. Bloomberg reports that Trump will sign the orders at noon following a meeting with about a dozen top corporate executives.
“Regulation has actually been horrible for big business, but it’s been worse for small business,” Trump said Monday. “Dodd-Frank is a disaster.”
Reaction from the industry was immediately positive. Doug Meyer, managing director of life insurance at Fitch Ratings called the delay “potentially a credit positive for annuity writers in the near to intermediate term.
"Key credit concerns include disruption in annuity sales and potential litigation exposure. In Fitch’s view it is still likely a new fiduciary standard will be enacted, and regardless of the form it takes, the industry’s compliance function has benefited from the process of preparing for the now delayed standard.”
Getting rid of the fiduciary rule permanently will require legislation or a lengthy rulemaking process. Republicans have three ways to kill the rule for good.
Senate Democrats vehemently oppose loosening financial regulations, and have cited the 2008 financial crisis as the reason. With a narrow 52-48 majority, Senate Republicans might have difficulty making wholesale changes.
Meanwhile, Dallas federal Judge Barbara M.G. Lynn announced Thursday that she intends to rule by next week on the U.S. Chamber of Commerce-led lawsuit against the DOL rule.
The Republican long game on both Dodd-Frank and the DOL rule might be found in the House bill known as the Financial CHOICE Act passed by the House Financial Services Committee in September.
The sweeping financial reform bill seeks to replace the Dodd-Frank Act and kill the Department of Labor’s fiduciary rule.
At the time, Rep. Jeb Hensarling, R-Texas, chairman of the committee, hailed the bill as a remedy for "growth-strangling regulation.”
Among the many changes the bill proposes, it would block the DOL from implementing its fiduciary rule by incorporating it into the Retail Investor Protection Act, which passed the House last year. Introduced by Rep. Ann Wagner, R-Mo., the RIPA requires the Securities and Exchange Commission to move first on a fiduciary rulemaking before the DOL can act.
The bill eliminates several Dodd-Frank provisions, including federal "bailouts" and the Volcker Rule, which restricts trading activities at banks.
Under CHOICE -- which stands for Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs -- the Financial Stability Oversight Council would no longer be able to designate risky non-banks and others as “systemically important financial institutions."
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at firstname.lastname@example.org.
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