Tag Archive for: DOL Fiduciary Rule

It's official: DOL fiduciary rule is dead

It’s official: DOL fiduciary rule is dead

It's official: DOL fiduciary rule is dead





The 5th Circuit Court of Appeals issued a mandate Thursday making its March 15 decision to strike down the regulation effective

By Mark Schoeff – InvestmentNews – June 21, 2018

After a long delay, the U.S. Fifth Circuit Court of Appeals confirmed Thursday a March decision to strike down the Labor Department’s fiduciary rule.

The court issued a mandate making effective the March 15 split decision that vacated the DOL regulation. The court majority held that the agency exceeded its authority in promulgating the rule, which would have required brokers to act in the best interests of their clients in retirement accounts.

In the mandate, the court also said the Labor Department has to pay the financial industry plaintiffs the costs related to the appeal.

“It is ordered and adjudged that the judgment of the District Court is reversed, and vacate the fiduciary rule in toto,” the mandate states. “It is further ordered that appellees pay to appellants the costs on appeal to be taxed by the clerk of this court.”

The 5th Circuit overturned a decision by a Dallas federal court that had upheld the DOL rule, representing the first win by industry opponents in several lawsuits that were filed against the measure.

The mandate was supposed to have been filed May 7. It was delayed for several weeks, as AARP and three states tried to intervene in the case to defend the rule after the Department of Justice, acting on behalf of the DOL, declined to appeal the March 15 decision.

The Securities and Exchange Commission is now firmly in the lead on the effort to reform investment advice standards. The agency’s proposal, which would subject brokers to a best interest standard, is open for public comment until Aug. 7.


SEC fiduciary rule ... is not a fiduciary rule

SEC fiduciary rule … is not a fiduciary rule

SEC fiduciary rule … is not a fiduciary rule

By Kenneth Corbin – FinancialPlanning – April 20, 2018

SEC fiduciary rule ... is not a fiduciary rule

For years, the common shorthand in describing any SEC move to set new regulations for brokers was a “uniform fiduciary standard” that would “harmonize” the rules for broker-dealers and investment advisors.

Nearly a decade after the debate began in earnest, the SEC on Wednesday issued a set of proposed rules that would neither impose a fiduciary standard on brokers nor fully align the standards for all wealth managers serving retail clients.

Instead, the SEC is backing a standard that would require brokers to put their clients’ interests ahead of their own, giving it a name that some investor advocates say is fundamentally misleading.

“I think what we see here falls well short of where we need to be to really get to a best interest standard,” says Knut Rostad, president of the Institute for the Fiduciary Standard.

The SEC voted to begin consideration on what it’s calling Regulation Best Interest, which would require brokers to make disclosures about conflicts of interest, take on a client-care obligation and set policies and procedures to keep conflicts of interest in check.

The commission is accepting comments on the proposal for 90 days.

It’s in the final component of the best interest proposal concerning conflict policies and mitigation that some consumer advocates see the greatest shortfall. Though the rule would require brokers to “disclose and mitigate” conflicts, if not eliminate them altogether, it still sounds only like a slightly more muscular version of the current suitability standard that governs brokers, according to Andrew Stoltmann, an attorney and president of the Public Investors Arbitration Bar Association.

“Right now, this standard shades far left towards the suitability standard, and is light years away from the fiduciary standard,” Stoltmann says in an interview, adding the current proposal is “somewhat disappointing.”

RIAs are still bound by their longstanding fiduciary obligation, though Stoltmann worries that that standard could get watered down in light of the interpretive guidance for advisors that the SEC is considering as part of the proposals put forward yesterday.

 “I think it’s clear that an RIA can’t recommend a proprietary product,” Stoltmann says. “The question I have is whether the SEC when it’s proposing parameters will say it’s okay for a fiduciary to do certain activities ― like recommending proprietary funds ― so long as the conflicts are disclosed.”

Others are more sympathetic to the brokerage model and take issue with a characterization that equates commissions with pernicious conflicts. When most brokers evaluate whether a product or strategy is suitable for their client, they weigh much the same information as a fiduciary advisor, including the cost of the product and a client’s risk tolerance and investment objectives, among other factors, according to Brendan McGarry, a financial-services attorney with the firm Kaufman

Dolowich & Voluck.

“The considerations are largely the same,” McGarry says in an interview. “I would argue that if you really look at the analysis that goes into determining if something is suitable or in the best interest or what goes into the fiduciary responsibility, when you break it down they’re really not all that different.”

Rostad, who says that “the immutable law is conflicts of interest are inherently harmful,” probably wouldn’t buy that.

Though Rostad grants that the SEC’s proposal was a “step forward” for improving investor protections, the best interest standard leaves much to be desired, given that the ambiguity over the term “mitigate” leaves open room for continued conflicts of interest, he says.

“Unless the best interest standard is truly is very, very akin to the fiduciary standard, then it is potentially ― probably ― misleading,” Rostad says. “There’s no such thing as three-quarters of a best-interest standard. You’ve either made it or you haven’t. This is pass-fail.”

So if the new broker standard isn’t a fiduciary standard, and it’s not as stringent as the rules governing the advisor camp, the SEC could have gone the other way, and acknowledged that brokers and advisors operate on separate tracks.

“If we’re not going to make material changes, let’s call it what it is ― and it is a broker standard,” Rostad says. “Never mind harmonization. Let’s go back to demarcation, and that is to separate them.”

Thanks in large part to the Department of Labor’s fiduciary proposal, that term ― “fiduciary” ― has gained currency among investors. But even as the SEC’s proposal seeks to elevate standards of care, by conferring on brokers a best-interest label, it could chip away at what had been a point of distinction for RIAs, according to Stoltmann.

“Under Regulation Best Interest, were seeing those lines blurred and crossed,” he says. “Think about that ― the average retail stock broker can say, ‘Well, yeah, a fiduciary has to act in your best interest, but so do I. Here’s the SEC saying it.’ And unless the client is a securities attorney, they’re going to say that sounds about right to me. So it sows the seeds of confusion.”


SEC fiduciary rule ... is not a fiduciary rule

What’s Next for the DOL Fiduciary Rule?

What’s Next for the DOL Fiduciary Rule?

March 16, 2018 by John Hilton

The Department of Labor fiduciary rule does not exist anymore after a late-Thursday court ruling. That court decision opens the door for the Securities and Exchange Commission and state insurance departments to take over rulemaking.

The Fifth Circuit Court of Appeals’ 2-1 decision stunned the industry and has many asking the same question this morning: What now?

Click HERE to read the full story via INN; subscription required.

Originally Posted at InsuranceNewsNet on March 16, 2018 by John Hilton.

SEC fiduciary rule ... is not a fiduciary rule

Gibson Dunn: No ‘Circuit Split’ on DOL Rule; Decision Applies Nationwide

Gibson Dunn: No ‘Circuit Split’ on DOL Rule; Decision Applies Nationwide

Gibson Dunn: No ‘Circuit Split’ on DOL Rule; Decision Applies Nationwide

Gibson Dunn: No ‘Circuit Split’ on DOL Rule; Decision Applies Nationwide

March 20, 2018 by Nick Thornton

Gibson Dunn, the law firm that successfully argued to vacate the Labor Department’s fiduciary rule before the U.S. Court of Appeals for the 5th Circuit, says the 2-to-1 decision in favor of industry opponents of the rule applies “nationwide.”

Citing the Administrative Procedure Act, the law that governs federal agency rule making, and Black’s Law Dictionary, attorneys for the firm said the ruling has the effect of the removing the fiduciary rule from the books.

Click HERE to read the original story via ThinkAdvisor.

“Under the APA, ‘vacatur’ is a remedy by which courts ‘set aside agency action’ that is arbitrary and capricious or otherwise outside of the agency’s statutory authority,” wrote attorneys for Gibson Dunn, including Eugene Scalia, in a client update.

The consequence of the 5th Circuit’s decision is to delete the fiduciary rule. “Because the effect of vacatur is, in essence, to remove a regulation from the books, its effect is nationwide,” wrote Mr. Scalia and a team of Gibson Dunn attorneys.

Since the decision was released last week, some attorneys in press reports have speculated that the fiduciary rule is still in effect. Other reports have suggested the decision may only impact investment and insurance providers and distributions within states under the 5thCircuit’s jurisdiction.

But the impact of the decision is not as ambiguous as some reports claim, according to Gibson Dunn.

By May 7, when the 5th Circuit is scheduled to issue a final order under the Federal Rules of Appellate Procedure, the fiduciary rule will effectively be erased from the Federal Register, “without geographical limitation,” the attorneys say.

No circuit split

Gibson Dunn’s client update also sets out to clarify the existence of a so-called circuit split over the fiduciary rule.

Days before the 5th Circuit released its ruling, the 10th Circuit Court of Appeals issued a more narrow ruling upholding the fiduciary rule’s treatment of fixed indexed annuities.

But the 10th Circuit decision did not address the larger question of the Labor Department’s authority to write the fiduciary rule as it did.

“Because the 5th Circuit vacated the rule on grounds the 10th Circuit did not address, no ‘circuit conflict’ is presented by the two decisions,” say the Gibson Dunn team.

The question of whether a circuit conflict, or split, exists has ramifications on a potential Supreme Court review of the fiduciary rule case.

“We commented on the scope of the 10th Circuit decision to correct apparent misperceptions about it,” said Jason Mendro, a partner at Gibson Dunn, in an email. “We had seen commentary incorrectly suggesting that it conflicts with the 5th Circuit’s decision, so we wanted to clarify that it does not.”

The odds of a Supreme Court review of any case are “always very low,” said Mr. Mendro, who was part of the litigation team that appealed to the 5th Circuit. According to the Supreme Court’s website, up to 8,000 petitions for review are requested each term. The High Court typically grants full review in about 1 percent of cases.

“The absence of a circuit split further reduces the likelihood of such review,” added Mr. Mendro.

NAFA expected to drop its appeal in D.C. Circuit

Last November, oral arguments before the D.C. Circuit Court of Appeals were delayed in a case brought by the National Association for Fixed Annuities.

NAFA was granted a delay of its hearing until after the 5th Circuit issued its decision. The original hearing in the D.C. Circuit had been scheduled for December 8, 2017.

Now that the 5th Circuit has vacated the fiduciary rule in its entirety, NAFA can be expected to drop its appeal, removing the potential for a split with the D.C. Circuit.

“When the (5th Circuit) court issues the mandate, vacatur will become effective, and the appellants (NAFA) in the D.C. Circuit case will have obtained the full measure of relief they sought in their appeal,” explained Mr. Mendro. “They should, therefore, dismiss their appeal.”

Originally Posted at ThinkAdvisor on March 19, 2018 by Nick Thornton.

SEC fiduciary rule ... is not a fiduciary rule

DOL Fiduciary Rule Struck Down by Appeals Court

DOL Fiduciary Rule Struck Down by Appeals Court

DOL Seeks 18-Month Delay of Fiduciary Rule

March 16, 2018 by Melanie Waddell

The U.S. Court of Appeals for the 5th Circuit voted 2-1 Thursday to vacate the Labor Department’s fiduciary rule.

The nine plaintiffs in the 5th Circuit case included the U.S. Chamber of Commerce, the Securities Industry and Financial Markets Association and the Financial Services Institute.

The ruling comes one day after Labor won a case in federal court brought against its fiduciary rule by Market Synergy Group, an insurance distributor.
The appeals court struck down the entirety of the fiduciary rule.

Click HERE to read the original story via ThinkAdvisor.

Labor’s next move is to decide whether to ask the full appeals court to rehear the dispute, or take the case to the U.S. Supreme Court.

The U.S. Court of Appeals for the D.C. Circuit still has an active case. That court will not be bound by how the 5th Circuit ruled.

In a joint statement, FSI, SIFMA and Chamber said that “the court has ruled on the side of America’s retirement savers, preserving access to affordable financial advice. Our organizations have long supported the development of a best interest standard of care and the Securities and Exchange Commission should now take the lead on a clear, consistent, and workable standard that does not limit choice for investors.”

According to the 5th Circuit ruling, Labor’s “new definition dispenses with the ‘regular basis’ and ‘primary basis’ criteria used in the regulation for the past 40 years. Consequently, it encompasses virtually all financial and insurance professionals who do business with ERISA plans and IRA holders. Stockbrokers and insurance salespeople, for instance, are exposed to regulations including the prohibited transaction rules. The newcomers are thus barred, without an exemption, from being paid whatever transaction-based commissions and brokerage fees have been standard in their industry segments because those types of compensation are now deemed a conflict of interest.”

Judge Says Rule Has ‘Woke’ Financial Services
Judge Edith Jones, who wrote the decision for the majority, stated that “DOL has made no secret of its intent to transform the trillion-dollar market for IRA investments, annuities and insurance products, and to regulate in a new way the thousands of people and organizations working in that market.”

Large portions of the financial services and insurance industries, Jones wrote, “have been ‘woke’ by the Fiduciary Rule and BIC Exemption. DOL utilized two transformative devices: it reinterpreted the 40-year-old term ‘investment advice fiduciary’ and exploited an exemption provision into a comprehensive regulatory framework.”

The court wrote in the ruling that President Donald Trump has directed Labor “to re-examine the Fiduciary Rule and prepare an updated economic and legal analysis” of its provisions, noting that the effective date of some provisions has been extended to July 1, 2019.

“The case, however, is not moot,” the ruling states. The fiduciary rule, the court said, “has already spawned significant market consequences, including the withdrawal of several major companies, including MetLife, AIG and Merrill Lynch from some segments of the brokerage and retirement investor market. Companies like Edward Jones and State Farm have limited the investment products that can be sold to retirement investors.”

The ruling continued: “Confusion abounds — how, for instance, does a company wishing to comply with the BICE exemption document and prove that its salesman fostered the ‘best interests’ of the individual retirement investor client? The technological costs and difficulty of compliance compound the inherent complexity of the new regulations.”

Labor’s rule also “contradicts the text of the ‘investment advice fiduciary’ provision and contemporary understandings of its language,” the ruling states.

Dissenting Judge Says DOL Acting ‘Within Its Authority’
The judge voting in favor of Labor’s fiduciary rule, Chief Judge Carl Stewart, wrote in his dissent, that: “I conclude that the DOL acted well within the confines set by Congress in implementing the challenged regulatory package, and said package should be maintained so long as the agency’s interpretation is reasonable.”

“DOL has acted within its delegated authority to regulate financial service providers in the retirement investment industry — which it has done since ERISA was enacted — and has utilized its broad exemption authority to create conditional exemptions on new investment-advice fiduciaries,” Stewart wrote. “That the DOL has extended its regulatory reach to cover more investment-advice fiduciaries and to impose additional conditions on conflicted transactions neither requires nor lends to the panel majority’s conclusion that it has acted contrary to Congress’ directive.”

Micah Hauptman, financial services counsel for the Consumer Federation of America, told ThinkAdvisor that the “case was wrongly decided. The industry opponents went forum shopping and finally found a court that was willing to buy in to their bogus arguments. This is a sad day for retirement savers.”

The opinion, Hauptman added, “is extreme by any measure. It strikes at the essence of the DOL’s authority to protect retirement savers under ERISA. It’s not only an attack on the rule, it’s an attack on the agency.”

— Mike Scarcella contributed reporting.

Originally Posted at ThinkAdvisor on March 15, 2018 by Melanie Waddell.

It's official: DOL fiduciary rule is dead

OMB Approves 18-Month Fiduciary Rule Delay, With ‘Change’

AUGUST 29, 2017

Originally published by ThinkAdvisor.

The delay must now be finalized by Labor Department

The Office of Management and Budget approved on Monday the 18-month delay for the more onerous provisions of the Labor Department’s fiduciary rule.

The OMB approval, which usually takes 90 days, took less than a month.

The office listed its action as “Consistent with Change,” which means OMB “had to make some changes as a result of the review, but not with the length of the extension because the title is the same,” says Fred Reish, partner in Drinker Biddle & Reath’s employee benefits and executive compensation practice group in Los Angeles. OMB likely had to “make changes to the economic analysis and maybe the length of the comment period.”

The delay must now be finalized by Labor.

Steve Saxon, partner at Groom Law Group, said that with the OMB review finalized, Labor will now release a proposed rule in the Federal Register with a comment period of no longer than 30 days.

“We do expect the delay to go through,” Saxon told ThinkAdvisor on Tuesday. “We think [Labor is] going to propose the extension and do a very short comment period and then approve it.”

And firms are waiting eagerly for that approval.

“People need confirmation that the delay will go through so they can hold off on the buildout of their systems and software and the like, which is very expensive,” Saxon said. “They don’t want to do that if there are going to be changes to the rule … recordkeepers and other retirement service providers are desperate for confirming of the delay.”

Labor Secretary Alexander Acosta told a Minnesota court on Aug. 9 that Labor had filed with OMB to delay the applicability date on three of the rule’s exemptions from Jan. 1, 2018 to July 1, 2019.

Labor proposed amendments to three exemptions, which were all approved by OMB:

  • The best-interest contract exemption, which opponents of the rule argued is the contract that would spark a slew of class-action lawsuits;
  • Class exemption for principal transactions in certain assets between investment advice fiduciaries and employee benefit plans and IRAs; and
  • Prohibited Transaction Exemption 84-24 for certain transactions involving insurance agents and brokers, pension consultants, insurance companies, and investment company principal underwriters.

“DOL is cognizant that the industry needs certainty on whether the deferred requirements will commence on Jan. 1,” said George Michael Gerstein, a lawyer with Stradley Ronon, a law firm in Washington that helps financial firms deal with regulators, in an email. “At this point, clarity is paramount.”

It's official: DOL fiduciary rule is dead

DOL Seeks 18-Month Delay of Fiduciary Rule

DOL Seeks 18-Month Delay of Fiduciary Rule

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.

Potential Changes

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.


It's official: DOL fiduciary rule is dead

Who Is Winning With the Fiduciary Rule? Wall Street

Who Is Winning With the Fiduciary Rule? Wall Street

Who Is Winning With the Fiduciary Rule? Wall Street








For now, the rule is setting money in motion

By Lisa Beilfuss – The Wall Street Journal – August 11, 2017

The brokerage business fiercely fought the new retirement advice rule. But so far for Wall Street, it has been a gift.

The rule requires brokers to act in the best interests of retirement savers, rather than sell products that are merely suitable but could make brokers more money. Financial firms decried the restriction, which began to take effect in June, as limiting consumer choice while raising their compliance costs and potential liability.

But adherence is proving a positive. Firms are pushing customers toward accounts that charge an annual fee on their assets, rather than commissions which can violate the rule, and such fee-based accounts have long been more lucrative for the industry. In earnings calls, executives are citing the Department of Labor rule, known varyingly as the DOL or fiduciary rule, as a boon.

“Primarily because of DOL” and market appreciation, assets are growing in fee-based accounts, said Stifel Financial Corp. Chief Executive Ronald Kruszewski, on a call in July. In an interview, he said such accounts can be twice as costly for clients.

Morningstar Inc. has said $3 trillion in tax-advantaged retirement savings are at stake, but some firms say even more is in play, as policies and marketing filter to nonretirement accounts.

For some consumers, a fee-based account could make economic sense. Such accounts can also come with more services, and they theoretically align a broker’s interest with that of the client. Some customers are negotiating discounts on the fees they pay, and some are moving to lower-cost firms, data suggests and industry executives say.

“Whether it’s in clients’ best interest is unclear,” said Steven Chubak, an analyst at Nomura Instinet. But the fiduciary rule is ”incentivizing firms to accelerate conversions“ to fees from commissions, he said, and “certainly the amount charged on a fee-based account versus a [commission-based] brokerage account is higher.” The push is speeding up an industry trend toward fees, which offer more predictable revenue that commission-based accounts.

“They are crying crocodile tears,” said Phyllis Borzi, a former Obama administration official who was an architect of the rule, referring to complaints from financial firms on the rule. That administration had said conflicted advice was costing individuals $17 billion a year and 1% in annual returns, figures that critics dispute.

The full effect of the rule remains to be seen. It has only partially gone into effect, with the Trump administration considering significant changes, including adjustments designed to lower compliance costs. Earlier this week, the Labor Department proposed delaying the rule’s compliance deadline by 18 months, a move that experts say suggests revisions are in the offing.

Even some benefiting from it still fault it, including Mr. Kruszewski from Stifel, whose business is largely based on commissions and who has said the rule limits choice.

For now, the rule is setting money in motion.

Bank of America Corp.’s Merrill Lynch has embraced the rule, even running an ad campaign around the idea of fiduciary advice. The firm, which for years has promoted fee-based accounts, last year gave its more than 14,000 brokers more flexibility to cut fees for clients moved onto its advisory platform without a reduction in their own pay. A big investment in adviser technology several years ago has aided the process by making it easier for advisers to convert brokerage accounts to fee-generating advisory accounts.

At Bank of America’s global wealth unit, which includes Merrill Lynch, fee-based assets rose 19% from a year earlier to $991 billion in the second quarter, or to 38% of client assets. More than two-thirds of Merrill’s advisers now have at least half of their client assets under a fee-based relationship, the firm said. The firm is also moving some clients to its online, commission-based “Merrill Edge” platform.

Morgan Stanley , meanwhile, has taken a different tack. Unlike Merrill, which has largely eliminated commissions in retirement accounts, Morgan Stanley has lowered commission costs to aid compliance with the regulation’s “reasonable compensation” standard. It, too, is rolling out a new computer-driven “robo” advisory tool.

For Morgan Stanley, fee-based assets grew 17% from a year earlier to $962 billion in the quarter, representing 43% of overall money in the wealth unit. On Morgan Stanley’s earnings call in July, finance chief Jonathan Pruzan credited the rule in part for gains in fee-based assets. “The Department of Labor’s fiduciary rule has contributed to these fee-based flows,” he said, and “revenues continue to grow with fee-based assets.”

Observers also note that market performance has helped drive assets higher, regardless of account type.

Discount brokers, which traditionally have catered to investors seeking to manage their own investment accounts and pay per transaction, also may gain business.

TD Ameritrade Holding Corp. said net new client assets in the latest period climbed to a record $22 billion from $13.6 billion a year ago. “The DOL fiduciary rule is driving a lot of momentum,” said Chief Executive Tim Hockey.

At Charles Schwab & Co., clients in the first half of the year brought roughly $2 to Schwab for every $1 that they moved from Schwab to a competitor, including traditional brokerage firms, the company has said. In dollar terms, that is about an 86% improvement from a year earlier. In the latest quarter, Schwab’s new retail brokerage accounts climbed 36% from a year earlier.

The fiduciary rule also is supporting the shift to lower-cost index funds that seek to match market moves instead of beat them, observers say, due to the rule’s requirement that brokers justify an investment’s costs.

Laurence Fink, chief executive of indexing giant BlackRock Inc., on the most-recent earnings call attributed “accelerated” flows partly to the fiduciary rule.

Other changes stemming from the fiduciary rule could hurt over the longer term. Aside from compliance costs and increased potential liability, products such as higher-cost mutual funds face pressure from lower-cost passively managed funds, said Devin Ryan, a JMP Securities analyst. The move away from such products could bring down the profitability of fee-based accounts over time, he said.

For now, though, the growth in these accounts have been another positive for Wall Street’s advisory businesses.

“The wealth-management business is almost like a yield stock,” James Gorman, Morgan Stanley’s chief executive, said on the firm’s latest earnings call. “So you can imagine the dividend coming out of wealth-management earnings.”


It's official: DOL fiduciary rule is dead

Best interest is in the eye of the beholder…

Best interest is in the eye of the beholder in debate over DOL fiduciary rule

Best interest is in the eye of the beholder in debate over DOL fiduciary rule

July 18, 2017 by Mark Schoeff Jr.

The term “best interest” is subjective it seems in the debate over the Labor Department’s fiduciary rule. The phrase is used by both critics and supporters of the measure to describe what they’re trying to do for the average investor.

The latest example of the fluidity of the term was seen in a July 13 hearing of the House Financial Services Subcommittee on Capital Markets, Securities and Investments. Lawmakers on the panel debated draft legislation offered by Rep. Ann Wagner, R-Mo., that would kill the DOL rule and replace it with a regulation written by the Securities and Exchange Commission that would “establish standards of conduct for brokers and dealers that are in the best interest of their retail customers,” according to the preamble of the measure.

Click HERE to read the full story via InvestmentNews; registration required.

Originally Posted at InvestmentNews on July 14, 2017 by Mark Schoeff Jr..

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It's official: DOL fiduciary rule is dead

SEC Chief Rips Into DOL Fiduciary Rule

 SEC Chief Rips Into DOL Fiduciary Rule

SEC Chief Rips Into DOL Fiduciary Rule

By Kenneth CorbinOnWallStreet – March 3, 2017

ASHINGTON ― The acting SEC chair isn’t mincing words on the Department of Labor’s fiduciary rule.

 “I have a very nuanced view of the DoL fiduciary duty rule: I think it is a terrible, horrible, no-good, very bad rule. For me that rule was never ever about investor protection,” Chairman Michael Piwowar says. “To me, that rule, it was about one thing and it was about enabling trial lawyers to increase profits.”

 His comments come as the fate of the Labor Department regulation is uncertain; the department has moved to delay implemention while it reviews the rule.

 Piwowar says now is the time to rethink the entire debate around a fiduciary standard because of favorable circumstances, including the freeze he put on writing new Dodd-Frank rules at the commission and the administration’s push to slow or block the Department of Labor’s fiduciary rule.

“That now opens us up to have a lot of staff-driven ideas come up through the commission, maybe things that haven’t gotten on the agenda for the last six-and-a-half years because they’ve been sort of crowded out by Dodd-Frank rulemaking, but yet are things we should be doing or should be thinking about,” Piwowar said in remarks at the Investment Adviser Association’s annual regulatory and compliance conference.

 For the better part of a decade, the debate over a uniform fiduciary standard has been framed by the provision in the Dodd-Frank Act that authorized (but did not require) the SEC to harmonize the rules governing different types of financial professionals who serve retail investors. In the context of the highly politicized and polarizing Wall Street reform law, participants in the fiduciary debate have tended to retreat to their “camps,” Piwowar says, and the uneven standards of care remain unchanged.

 “What I’d like to do is take the opportunity to step back from that and have a more fulsome discussion,” he says.

 Piwowar suggests using a 2008 RAND study that the SEC commissioned as a starting point to reorient the fiduciary discussion. That study found that while investors are generally pleased with the investment advice they receive, there is widespread confusion about the different standards of care that govern the brokerage and advisory sectors.

 In part, that confusion arises from the myriad titles financial professionals confer upon themselves, with many strains of “advisers” offering their services while operating under different regulatory environments.

 “The idea that if someone calls themselves a financial adviser ― that means absolutely nothing, right?” Piwowar says. “Whether they spell it ‘adviser’ with an ‘E’ or ‘advisor’ with an ‘O,’ it means absolutely nothing, but a registered investment adviser has a very specific meaning, and therein creates a lot of the confusion.”

 He says that a renewed consideration of the fiduciary standard could “start a conversation with people about, ‘Gee, if you call yourself an adviser or an advisor, then you have to hold yourself out to the suitability requirement of the Investment Adviser Act and case law that’s come before that.'”

 Piwowar urged the advisers and compliance professionals attending the IAA’s conference to engage with SEC staffers to advance the fiduciary discussion and help to surface other proposals that could improve the regulatory environment, such as reforms to the commission’s advertising or custody rules.

 Piwowar acknowledges that there will be little movement on major rulemaking initiatives like a fiduciary standard while he is the acting chair, but he hopes to at least to begin developing the groundwork for some fresh proposals ahead of the confirmation of Jay Clayton, President Trump’s nominee for chairman, and the filling of the two additional vacant commission seats.