President Trump’s action on the fiduciary rule landed with a bang, but it wasn’t quite what some anticipated (or feared). Here’s a breakdown of what the president did, and what may happen next.
What actually happened?
Trump signed a memorandum on Friday that instructs the Department of Labor to begin a review of the fiduciary rule.
Has the fiduciary rule been delayed?
Not yet. Trump’s memo did not explicitly order a delay, but the Labor Department issued a statement saying it would consider its legal options to do so in order to comply with the president’s instructions. The original implementation date is set for April 10.
So what does Trump’s memorandum do?
It lays down the rules for reversing the rule.
Trump asked the Labor Department to evaluate whether the regulation would harm investors’ access to retirement products or advice; whether the rule would disrupt the financial advice industry; and whether it would cause an increase in litigation.
If the department concludes the answer is yes to any of those questions, then the Labor Department is to start a new rule-making process to rescind and replace the fiduciary rule. It doesn’t specify what a new rule should be.
Trump adds that one his administration’s priorities is to “empower Americans to make their own financial decisions,” and if the Labor Department finds the rule to be at odds with that goal, then it should rescind the rule.
What’s the likelihood it will be overturned?
The bar is set very low.
“It appears that they could, for example, find that retirement savers still have access to advice, that costs are coming down, that quality of advice is going up, that firms are adapting to the rule, and that the rule is working as intended, but also find that the risk of litigation is rising and conclude that the rule needs to be reconsidered,” says Barbara Roper, director of investor protection at the Consumer Federation of America.
If the Labor Department does rescind the rule, then it will issue a new one and there will be a new comment period, similar to the one last year.
Will the SEC now craft a fiduciary rule?
It's not likely.
The agency has been authorized to craft a fiduciary rule under Dodd-Frank since 2010. But it’s failed to do so each year. Last year, former SEC Chair Mary Jo White blamed a lack of resources and consensus. Trump’s pick to replace her has yet to be confirmed ― and the president has to appoint two additional commissioners to fill out the five seats.
Further complicating matters, Trump has ordered a review of Dodd-Frank’s rules and congressional Republicans are thinking about repealing the law. It’s not clear if the SEC’s mandate to craft a fiduciary regulation would remain.
Moreover, Trump has signaled his administration’s goal is to remove regulations. Last week, he went so far as to sign an executive order instructing government departments and agencies that they must rescind two regulations for each new one introduced.
In short, there's still a lot left to be decided.
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