By Neil Gordon, Project on Government Oversight
The Department of Labor will let an Obama administration Wall-Street ethics rule take effect next week.
Last week, Secretary of Labor Alexander Acosta announced in a Wall Street Journal opinion piece that Labor will not delay implementation of a rule that will impose a fiduciary duty on financial planners who advise retirement savers. It will require stockbrokers, financial planners, and insurance agents who provide advice about IRA and 401(k) accounts to put their clients’ interest first and disclose any conflicts of interest. Currently, advisers are only required to have a “reasonable basis to believe” an investment recommendation is “suitable” for the client.
Some of the rule’s provisions will go into effect on June 9. Full implementation will occur on January 1, 2018. “Respect for the rule of law leads us to the conclusion that [the June 9 effective date] cannot be postponed,” Acosta, a former federal prosecutor, wrote.
In February, President Trump ordered Labor to review the rule “to determine whether it may adversely affect the ability of Americans to gain access to retirement information and financial advice,” and to revise or rescind the rule if such potential adverse effects are found.
Acosta indicated that Labor’s review is far from finished, and that the rule will likely be revised. “The Labor Department has concluded that it is necessary to seek additional public input on the entire Fiduciary Rule, and we will do so,” he asserted, noting that the rule “as written may not align with President Trump’s deregulatory goals.”
“Trust in Americans’ ability to decide what is best for them and their families leads us to the conclusion that we should seek public comment on how to revise this rule,” Acosta wrote.
Acosta’s announcement showed no softening of the Trump administration’s anti-regulatory stance, pointedly blaming “unnecessary” regulations for eliminating jobs and inhibiting job creation. But it was also an eloquent endorsement of administrative procedure and compliance with the law:
Some who call for immediate action on the Obama administration’s regulations are frustrated with the slow process of public notice and comment. But this process is not red tape. It is what ensures that agency heads do not act on whims, but rather only after considering the views of all Americans. Admittedly, this means deregulation must find its way through the thicket of law. Casting aside the thicket, however, would leave Americans vulnerable to regulatory whim.
The financial services industry has waged a years-long fight against the adviser fiduciary rule, spending millions on lobbying and campaign contributions, and whipping up public outrage with doomsday forecasts of how the rule will affect small investors. The fight continues, and industry will likely gain some concessions during the review period. Fortunately, the battle has already led some Wall Street firms to change their business practicesto conform to the new requirements.