DOL Seeks 18-Month Delay of Fiduciary Rule
By John Hilton – InsuranceNewsNet – August 9, 2017
The Department of Labor moved today to delay phase two of the controversial Obama-era fiduciary rule by 18 months.
Documents (ß Notice of Administrative Action)were filed today with the Office of Management and Budget to delay phase two from Jan. 1, 2018, until July 1, 2019. The OMB will review the submission for publication in the Federal Register, which, barring any complications, makes the delay official.
Phase one of the DOL rule took effect June 9. It requires advisors and agents to act as fiduciaries, make no misleading statements and accept only “reasonable” compensation.
Still, opponents are far more concerned with phase two rules that establish a class-action right to sue under the Best Interest Contract Exemption. The BICE will be required to sell fixed indexed and variable annuities beginning Jan. 1, 2018.
In addition, the DOL said the delay will apply to two other exemptions, PTE 84-24 and PTE 2016-02. The latter exemption applies to advice to individual retirement accounts and employee benefit plans.
As for potential changes during the delay, Bradford Campbell said last month that the BICE is likely to be weakened. Counsel at Drinker Biddle & Reath. Campbell previously led the DOL department responsible for the fiduciary rule during the Bush administration.
The BICE requires significant disclosures, and a signed contract with the client. That contract forms the basis of litigation liability.
Removing the class-action lawsuit from the BICE is a good possibility, Campbell said, basing his opinion on statements the DOL has made so far. If the class-action right isn’t scratched, it will cause problems in the courts, he predicted.
A delay will make even more likely the DOL and the Securities and Exchange Commission end up working together on a fiduciary standard the industry can live with, Campbell added.