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Financial Services Law Insights and Observations


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  • Members of the House Financial Services Committee Weigh in on Rollout of the DOL Fiduciary Rule


    On March 17, GOP members of the House Financial Services Committee sent a letter to Acting Labor Secretary Ed Hugler expressing their support for the Department of Labor’s (DOL’s) proposal to delay the implementation of its Fiduciary Rule from April 10 until June 9. The letter asserts, among other things, that a delay is “necessary to review the rule’s scope and assess potential harm to investors, disruptions within the retirement services industry, and increases in litigation, as required by the Presidential Memorandum signed by President Trump on February 3, 2017.” The GOP Members also note that they “have long been concerned with the DOL Fiduciary Rule's impact on retail investors and the U.S. capital markets,” and, have therefore “advocated that the expert regulator—the Securities and Exchange Commission (SEC)—should craft an applicable rule.” 

    Later that day, House Democrats sent their own letter to the Acting Labor Secretary expressing opposition to the DOL’s proposed 60-day delay of its Fiduciary Rule. Specifically, the Democratic members contend that “the rule is reasonable and workable for advisers,” because, among other reasons, “the DOL provided appropriate relief that mitigates industry concerns and compliance costs.”

    Securities DOL Fiduciary Rule Fiduciary Rule House Financial Services Committee Agency Rule-Making & Guidance Investment Adviser

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  • President Issues Executive Order to Study the DOL's Fiduciary Rule

    Federal Issues

    On February 3, President Trump issued an Executive Memorandum directing the Department of Labor (DOL) to examine the Fiduciary Rule—an April 2016 DOL rule that expands the circumstances in which a person will be treated as a fiduciary under both ERISA and Section 4975 of the Internal Revenue Code by reason of providing investment advice to retirement plans and IRAs. In the memorandum, President Trump calls for an examination of the Fiduciary Rule to determine whether it (i) has harmed or is likely to harm investors; (ii) has resulted in dislocations or disruptions within the retirement services industry; and (iii) is likely to cause an increase in litigation and an increase in the prices that investors and retirees must pay to gain access to retirement services. If the Secretary of Labor makes any of these findings, the memorandum directs the Secretary of Labor to publish a proposed rule rescinding or revising the Fiduciary Rule. Initial compliance with the Fiduciary Rule is currently required by April 10, but the DOL has announced that it “will now consider its legal options to delay the applicability date as we comply with the President’s memorandum.”

    Federal Issues Consumer Finance Fiduciary Rule Department of Labor Executive Order Trump

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  • DOL Releases Second Set of FAQs Addressing Comments Concerning Fiduciary Rule

    Federal Issues

    On January 13, the Department of Labor (DOL) released a second set of frequently asked questions (FAQs) in response to comments from financial services firms and other stakeholders on its recently-released Fiduciary Rule, which redefines a fiduciary investment advisor under the Employee Retirement Income Security Act of 1974. The DOL issued an initial set of 34 answers to FAQs about the Fiduciary Rule back in October, focusing on the rule’s exemptions, such as the “best-interest contract” exemption and the “prohibited-transaction” exemption. The second set of FAQs provides further clarification on the scope of various exemptions regarding investment recommendations, but also includes guidance on topics such as: (i) investment education; (ii) general communications versus fiduciary investment advice; (iii) fees and other compensation; and (iv) platform providers.

    The FAQs further reflect, among other things, that an adviser charging clients a level asset-based fee for providing advice on 401(k) fund offerings may use revenue-sharing payments to offset part or all of that level fee, without running afoul of the fiduciary regulation. The guidance also clarifies that providing educational information to IRA and retirement customers about investment alternatives—such as product features, returns and fees—will not be considered “investment advice” so long as a bank does not make any specific investment recommendations. And, in question 34, the DOL explains that fiduciary status is not triggered by offering to customers an automatic sweep of any uninvested cash from the customer’s account into a short-term investment vehicle on a daily basis.

    Federal Issues Payments Fiduciary Rule Department of Labor

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  • Rep. Wilson Introduces Bill to Delay Fiduciary Rule

    Federal Issues

    On January 6, Rep. Joe Wilson (R-S.C.) introduced the Protecting American Families’ Retirement Advice Act, a bill that would delay by two years the effective date of the Department of Labor’s “fiduciary rule.” As discussed previously on InfoBytes, the fiduciary rule—which is presently set to take effect in April 2017—expands the definition of “investment advisor” to include a “wider array of advice relationships,” thereby imparting new standards on financial advisors and brokers handling retirement accounts. In a statement, Rep. Wilson described the Fiduciary Rule as “one of the most costly, burdensome regulations to come from the Obama Administration.” Wilson’s proposed legislation seeks to delay the rule’s implementation in order to “giv[e] Congress and President-elect Donald Trump adequate time to re-evaluate.”

    Federal Issues Banking President-Elect Congress Fiduciary Rule Agency Rule-Making & Guidance

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