Displaying items by tag: fiduciary rule

(Washington)
Advisors should breath a sigh of relief today. Following the fiduciary rule’s resounding court defeat last week, the DOL has done what the industry has been hoping it would—accept the decision. Following the ruling, the DOL now says it will not enforce the fiduciary rule in any way. A DOL agency spokesman said clearly “Pending further review, the [Labor Department] will not be enforcing the 2016 fiduciary rule”. The DOL will also very likely not challenge the court’s ruling.

FINSUM: Given that this is an entirely new DOL versus the one that drafted the rule under Obama, their behavior makes total sense. The way is finally nearly cleared for a new rule.

(Washington)

The ruling against the DOL’s fiduciary rule last week threw a monkey wrench into everyone’s assessment of the future of the rule. While the DOL looked less likely to ultimately implement it, the big worry was that the ruling might dissuade the SEC from getting involved in the space. Well, it appears there is no immediate reason for concern, as SEC head Jay Clayton went on the record yesterday to clarify his agency’s position. Clayton said the ruling “hasn’t affected the way I’m approaching this … I haven’t had any discussions with DOL about what it means from a broader perspective of administrative law. But, as far as I’m concerned, we’re moving forward”. Speaking about the timing of issuing a new rule, Clayton said “the sooner the better”.

FINSUM: This is good news. Whether or not you want any fiduciary rule, one needs to be happy the SEC is stepping in because it lowers the likelihood that each state creates its own rule.

(Washington)

So at first the recent court ruling against the fiduciary rule looked like good news for the industry. A court had finally ruled against the rule, which seemed to be a sign that it would never fully be implemented, while also raising the odds it would be reviewed by the Supreme Court. However, Barron’s says that the ruling may have a perversely negative effect as it may cause the SEC to re-examine its efforts at drafting a fiduciary rule. According to the Investment Adviser Association, the ruling “is likely to give pause to the SEC with regard to its own fiduciary rulemaking”.

FINSUM: The SEC likely won’t want to get involved in a protracted legal process over whatever rule it proposes, so it may continue what it has done 2010 with regards to the fiduciary topic—nothing.

(Washington)

If the fiduciary rule was on its last legs before, it is really in trouble now. The DOL’s rule suffered its first significant court defeat this week. A US circuit court struck down the rule, saying it was too broad and “unreasonable”. The court found fault with the government’s broadened definition of what constitutes financial advice and who gives it. The loss means circuit courts have split on the fiduciary rule and it now appears likely the Supreme Court will take up the case.

FINSUM: This is a major blow to the fiduciary rule, and may help usher an even quicker departure for it. It will certainly give the DOL more ground to shift to a new rule co-drafted with the SEC.

(New York)

Advisors need to be very mindful of an old regulation that is taking on new relevance in light of the fiduciary rule. While the DOL’s rule may not be fully enacted, one concept it adopted, which is based on precedent from the ERISA and IRS codes, could be a thorn in the side of advisors. That concept is “reasonable compensation limits”, and is of particular concern to high earning advisors as they will need to look hard at the services they provide and come up with justifications for their pricing. According to a top industry lawyer, this rule will not be undone by a new SEC or DOL rule, so it is here to stay; “Even if the DOL, SEC or Finra roll back the fiduciary rule so that lots of advisor reps and insurance agents are no longer fiduciaries, the reasonable compensation limits would still apply”.

FINSUM: The argument is that this rule’s new relevance will lead to a clearing out of highly priced and highly paid advisors.