On February 3, 2017, President Donald Trump ordered a review of the Department of Labor (the “DOL”) Conflict of Interest Rule (the “Fiduciary Rule”) scheduled to become effective April 10, 2017, and the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”).
The “Presidential Memorandum on Fiduciary Duty Rule” directs the Department of Labor to review the Fiduciary Rule to determine whether it may adversely affect Americans’ access to retirement information and financial advice. The Fiduciary Rule was published in the Federal Register April 8, 2016, and would expand the definition of a fiduciary under the Employee Retirement Income Security Act (“ERISA”) to impose certain fiduciary obligations on retirement investment advisers. As part of the review process, the DOL must prepare an analysis of whether the Fiduciary Rule will: reduce access to certain retirement savings offerings or related financial advice; disrupt the retirement services industry, causing a negative impact on investors or retirees; and/or increase litigation or prices that investors must pay for retirement services. If the DOL determines that the Fiduciary Rule may adversely affect the ability of Americans to gain access to retirement information and financial advice, the DOL must publish for notice and comment a proposed rule rescinding or revising the Fiduciary Rule. Although there is no delay currently imposed on the implementation of the Fiduciary Rule (as was widely reported and included in a draft version of the Memorandum), the DOL likely will need to postpone the scheduled April 10, 2017, effective date to conduct the review process.
The “Presidential Executive Order on Core Principles for Regulating the United States Financial System” orders the Secretary of the Treasury to consult with the heads of the member agencies of the Financial Stability Oversight Committee (established under Dodd-Frank) and report to the president within 120 days of the order and periodically thereafter. The report must include an analysis of the extent to which current laws and regulations promote or inhibit the regulation of the United States financial system consistent with the core principles identified in the Order. The core principles include empowering Americans to make independent and informed financial decisions, preventing taxpayer-funded bailouts, fostering economic growth, enabling global market competition, and restoring public accountability within federal financial regulatory agencies.
If you have any questions about complying with the Fiduciary Rule, or the implications of the executive actions taken February 3, 2017, please contact one of the authors or your Reed Smith attorney.
Client Alert 2017-044