The U.S. Department of Labor sent its revised fiduciary rule proposal to the Office of Management and Budget on Monday. A draft of the proposed rule, titled Improving Investment Advice for Workers & Retirees Exemption, is not yet available and must be approved by the OMB and sent back to the Labor Department before it is released for public comment.
The original DOL fiduciary rule broadened the definition of investment advice fiduciary under the Employee Retirement Income Security Act of 1974 and sought to eliminate conflicted retirement investment advice by placing certain restrictions on commission-based product recommendations.
According to its Spring 2019 regulatory agenda, the DOL originally planned to propose a new fiduciary rule in December 2019 after the previous version was vacated by the Fifth Circuit Court of Appeals in March 2018.
After surviving multiple federal lawsuits, the Obama-era regulation was vacated in its entirety in a 2-1 split decision in March 2018, ruling that the DOL overstepped its authority in the investment advice arena.
Current Labor Secretary Eugene Scalia represented the U.S. Chamber of Commerce, Financial Services Institute, and other trade associations in the lawsuit that overturned the rule while in private practice as an attorney with Gibson Dunn & Crutcher, prior to being appointed head of the Labor Department.
The Securities and Exchange Commission’s broker advice rule, dubbed Regulation Best Interest, has a compliance date of June 30, 2020.
Regulation BI establishes a “best interest” standard of conduct for brokers when they make a recommendation to a retail customer of any securities transaction or investment strategy involving securities.
It is unclear what the new rule will entail or how long the OMB will take to review, but before he resigned amid the Jeffery Epstein scandal, former Labor Secretary Alexander Acosta pledged to work with the SEC on the rulemaking. SEC chairman Jay Clayton had also discussed coordinating with the DOL and state regulators on a “harmonized” fiduciary rule, which he called a “top priority.”