First it was government-sponsored retirement plans, now it’s the fiduciary rule.
Left-leaning Trump opponents are suddenly finding the efficacy in states’ rights, taking the fiduciary fight to an entirely different battlefield.
“The controversy over a rule restricting conflicted retirement advice is shifting to states, which are moving to bolster investor protections out of concern the Trump administration will weaken the federal provision,” The Wall Street Journal reported Wednesday.
The paper noted that in recent months, the governors of Nevada and Connecticut signed bills” to expand or amplify fiduciary requirements for brokers.
“Legislators in New York, New Jersey and Massachusetts have introduced similar bills. And several other states, including California, have indicated interest in exploring such requirements.”
These smaller, decentralized and what the Journal refers to as “piecemeal legislative efforts” have galvanized the industry months after many cheered Trump’s election as an indication a regulatory rollback would occur.
Industry executives and trade groups “say they are watching the states’ actions and beginning to lobby at the state level to prevent a scenario where state laws mushroom as the federal fiduciary rule dwindles.”
“The states are … picking up the pieces,” John Grady, an attorney who also leads the Alternative and Direct Investment Securities Association, said. “People feel there’s a vacuum they have to fill.”
The Department of Labor recently proposed delaying full implementation of the fiduciary rule until January 1, 2019.
The current date for full implementation is one year earlier, January 1, 2018. The additional delay was first proposed in early August and approved by the Office of Management and Budget earlier this week.
“The Department is particularly concerned that, without a delay in the applicability dates, regulated parties may incur undue expense to comply with conditions or requirements that it ultimately determines to revise or repeal,” it noted.
It proposes to extend the special transition period under sections II and IX of the Best Interest Contract Exemption and section VII of the Class Exemption for Principal Transactions in Certain Assets Between Investment Advice Fiduciaries and Employee Benefit Plans and IRA.
“This document also proposes to delay the applicability of certain amendments to Prohibited Transaction Exemption 84-24 for the same period,” it added. “The primary purpose of the proposed amendments is to give the Department of Labor the time necessary to consider possible changes and alternatives to these exemptions.”
It would affect participants and beneficiaries of retirement plans, IRA owners and their fiduciaries.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
Something to consider: The article title is a bit of hyperbole. “States resist” implies a great deal more than 2 states have passed and 3 are considering legislation. Our industry’s journalists have generally distanced themselves from the sensationalism of other media by avoiding such hyperbole.