The Department of Labor has set a date for a new fiduciary rule push (officially the “Conflict of Interest Rule”) of December 2019.
The date, which appears in the department’s spring regulatory agenda on the Office of Management and Budget website, will be the third try for proponents, after the Fifth Circuit Court of Appeals bombshell ruling that vacated the rule in March 2018.
“The Department of Labor in 1975 issued a regulation defining who is a ‘fiduciary’ under section 3(21)(A)(ii) of the Employee Retirement Income Security Act (ERISA) as a result of giving investment advice for a fee or other compensation,” the DOL notes in its summary description. “On April 8, 2016, the Department replaced the 1975 regulation with a new regulatory definition. The new regulatory definition was vacated in toto in Chamber of Commerce v. Department of Labor, 885 F.3d 360 (5th Cir. 2018). The Department is considering regulatory options in light of the Fifth Circuit opinion.”
Reg BI’s Role
Labor Secretary Alexander Acosta had hinted in early May at a fiduciary rule reboot in contentious testimony before the House Committee on Education and Labor about the department’s budget and priorities for the upcoming fiscal year.
“So, the Department of Labor is working with the SEC,” Acosta explained at the time. “The SEC was asked by Congress to come up with appropriate responses to protect these individuals. We are communicating with them and based on our collaborative work, will be issuing new rules in this area.”
The role that a fiduciary standard plays in financial services, specifically with advisors and clients, has been hotly debated for some time, with the SEC’s Regulation Best Interest taking center stage after the Fifth Circuit’s ruling.
Fiduciary rule proponents, including consumer groups, opposed the SEC’s regulation, arguing it was too friendly to industry interests and would further confuse clients.