WASHINGTON (Legal Newsline) - President Donald Trump on Friday ordered a review of the U.S. Department of Labor’s controversial new fiduciary rule.
Trump’s executive order instructs the DOL to conduct a new study to determine whether the rule is likely to harm investors and the financial industry, and if it does, the rule can be rescinded or revised.
An earlier, unsigned version of the order, which had been circulating on various news websites, called for a six-month delay of the rule. The previous version also stated the department and the U.S. Department of Justice could seek a stay of any litigation filed over the rule. However, the final order lacked such specifics.
Trump signed the order shortly after 1 p.m. EST, according to remarks posted on The White House’s website.
“The rule is a solution in search of a problem,” Press Secretary Sean Spicer said. “There are better ways to protect investors, and the Trump administration is taking action to do so.
“We’re directing the Department of Labor to review this rule. The rule’s intent may be to have provided retirees and others with better financial advice, but in reality, its effect has been to limit the financial services that are available to them.”
According to The White House, Trump signed the order with U.S. Rep. Ann Wagner, R-Missouri, in attendance.
Wagner, herself, called the order her “baby.”
“What we’re doing is we are returning to the American people, low- and middle-income investors, and retirees, their control of their own retirement savings,” she said in the remarks. “This is about Main Street, and it’s been a labor of love for me for over four years as chairman. And I have had -- this is a big day, a big moment for Americans.”
In a separate statement, Wagner, a member of the House Committee on Financial Services, said the order will better protect investors’ ability to access retirement investment advice.
“This delay will allow the administration to potentially repeal the rule entirely, and within this time, I will continue working toward a permanent, legislative solution in Congress to help preserve investment choice, access and affordability while ensuring all families are receiving investment advice that is truly in their best interest,” she said.
The DOL released its final rule last April. The rule, sometimes referred to as the conflicts of interest rule, mandates financial professionals who service individual retirement accounts, including IRAs and 401(k) plans, to serve the “best interest” of the savers and disclose conflicts of interest.
The final rule is set to take effect in part by April, with full implementation set for January 2018.
John Berlau, a senior fellow at the Competitive Enterprise Institute, a self-described “non-profit libertarian think tank,” said Trump was “entirely sensible” to ask the DOL to review the rule.
“The fiduciary rule is, by the government’s own estimates, the most expensive regulation promulgated by the Obama administration last year,” Berlau said in a statement. “It threatens the loss of access to investment advice and choices for millions of middle-class savers, as well the livelihoods of thousands of Main Street brokers and insurance agents.
“The DOL also promulgated this rule by stretching the bounds of the 42-year-old Employee Retirement Income Security Act in a way Congress never intended, and the agency is now subject to lawsuits charging that the rule is ‘arbitrary and capricious.’”
The Financial Services Roundtable, a lobbying and advocating organization for the financial services industry, said the president’s order is a “necessary step” to ensure modest-income savers maintain choice and avoid higher costs and reduced services.
“Financial professionals should act in the ‘best interest’ of their customers, but such a requirement should be implemented without miles of bureaucratic red tape,” FSR CEO Tim Pawlenty said in a statement.
Last month, U.S. Rep. Joe Wilson, R-S.C., introduced legislation providing for a full two-year delay of the rule’s effective date.
“The Department of Labor’s fiduciary rule is one of the most costly, burdensome regulations to come from the Obama administration. Rather than making retirement advice and financial stability more accessible for American families, they have disrupted the client-fiduciary relationship, increased costs, and limited access,” Wilson said in a previous statement.
Various trade associations and financial servicing companies have filed lawsuits against the DOL rule in the last year.
But efforts to do away with or halt the rule have fallen short thus far.
In late June, the U.S. House of Representatives failed to override a presidential veto of H.J. Res. 88, a resolution that would have nullified the DOL’s final rule.
Former President Barack Obama vetoed H.J. Res. 88, calling the rule “critical” to protecting Americans’ savings and retirement security.
“The outdated regulations in place before this rulemaking did not ensure that financial advisers act in their clients’ best interests when giving retirement investment advice,” Obama said at the time. “Instead, some firms have incentivized advisers to steer clients into products that have higher fees and lower returns -- costing America’s families an estimated $17 billion a year.
“The Department of Labor’s final rule will ensure that American workers and retirees receive retirement advice that is in their best interest, better enabling them to protect and grow their savings.”
From Legal Newsline: Reach Jessica Karmasek by email at email@example.com.