The Department of Labor will propose delaying the applicability date of the fiduciary rule by 60 days in order to complete a review of the regulation ordered by President Trump, according to a document on the website of the Federal Register.
The move comes as many firms have been plowing ahead with plans to comply with the regulation, originally set to take effect on April 10.
Delaying and ultimately reversing the rule would have enormous implications for the industry. Merrill Lynch, for example, recently indicated that it could walk back aspects of its implementation strategy, including a pledge to cease offering commission-based retirement accounts.
Fiduciary opponents hope that the proposed delay will be followed by further moves to rescind or rewrite the rule. Trump issued a memo earlier this month asking the Labor Department to review the regulation and reverse it if the department concluded that it would adversely affect investors.
SIFMA called for the delay to be implemented "with haste," saying that the regulation is causing firms to cease offering products as well as serving certain client accounts.
"Delaying the rule is imperative to avoid further client confusion and market disruption, as firms approach the drop-dead date to notify tens of millions of customers of service changes to their accounts because of the rule, ultimately making retirement savings more difficult for many investors," the trade group said in a statement.
Advocates for a fiduciary standard have been pressing to keep the rule in the place.
Ron Rhoades, professor and director of the Financial Planning Program at Western Kentucky University, criticizes the Trump administration's economic analysis of a potential delay, saying that individual investors stand to lose millions.
"Additionally, the Department of Labor took six years, and employed numerous economists, in demonstrating the tremendous benefits of the rule to individual investors, plan sponsors, and to the U.S. economy in general. The grant of 60 days will only result in the Department of Labor struggling to undo the fiduciary rulemaking which it has already clearly expressed is beneficial to Americans, and to America itself," Rhoades says.
The Labor Department did not respond to requests for additional comment.
DELAY WOULD BE 'SIGNIFICANT'
The Labor Department's proposed delay, which is scheduled to be published in the register on Friday, outlines a comment period of 15 days in which the public can ask questions about the department's intent as well as Trump's memo.
"The extension would make it possible for the department to take additional steps (such as completing its examination, implementing any necessary additional extension(s), and proposing and implementing a revocation or revision of the rule) without the rule becoming applicable beforehand," according to the document.
The Office of Management and Budget completed its review of the proposal earlier this week and deemed it "economically significant."
"The nature and magnitude of any such delay of the effects is highly uncertain, as some variation can be expected in the pace at which firms move to comply and mitigate advisory conflicts and at which advisers respond to such mitigation and adjust their recommendations to satisfy impartial conduct standards," the Labor Department says in its proposal.
The delay and possible demise of the fiduciary rule comes after the regulation survived several court challenges, including a lawsuit brought by some industry trade groups. The U.S. Chamber of Commerce, SIFMA, Financial Services Roundtable and Insured Retirement Institute vowed last week to appeal a federal judge's recent ruling against their lawsuit.
The chamber said in a statement that it welcomed the proposed delay.
"We commend the Department of Labor for its swift action to protect retirement savers by issuing a notice of proposed rulemaking to delay the fiduciary rule, which will help ensure all Americans have access to the advice and choices needed when saving for their future," the chamber said.
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