Fiduciary Rule's 'Soft Open' Makes Full Repeal Less Likely

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U.S. Labor Secretary Alexander Acosta today said his department will implement the fiduciary rule on June 9 with no further delays. As confirmed in the FAQs, the standard for financial advisors who are fiduciaries under the amended and soon-to-be-effective rule can not accept otherwise prohibited compensation in connection with an investment recommendation unless: (i) the advice they give is in the best interest of the retirement investor, which requires that the advisor exercise appropriate care in making his/her recommendation and that the recommendation be in the best interest of the client and not the advisor or his/her firm; (ii) the advisor charges no more than reasonable compensation; and (iii) the advisor makes no misleading statements about the recommendation, his or her compensation and/or any conflicts of interest.

Rejecting calls for a complete delay of the rule's implementation, the DOL said that along with the partial implementation on June 9, full implementation remains slated for January 1, 2018.

"We...have found no principled legal basis to change the June 9 date while we seek public input", he wrote.

The rule, which was finalized in April 2016 after years of back and forth between federal regulators and the banking industry, aimed to prevent advisors from gouging customers by selling them products that could benefit the advisor financially but may not be in the best interest of the individual.

FINSUM: So it appears an internal move from the DOL to delay the rule further has no been ruled out. "We will do so while respecting the principles and institutions that make America strong".

The DOL delayed portions of the Obama administration's regulatory package that aimed to reduce the allegedly conflicted investment advice given to retirement savers until June 9.

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He also said the department was seeking "public comment" on how to revise the rule, leaving open a possibility of repealing the rule in future.

Observers also expect R6 funds to swell in popularity among retirement plan advisers due to the fiduciary rule.

"Retirement savers need an enforceable fiduciary standard and a Department of Labor that is prepared to hold firms accountable for compliance", Americans for Financial Reform, a coalition of more than 200 consumer, labor civil rights and business groups, said in a statement that italicized its enforcement focus.

"We will work with Secretary Acosta, Congress and through the legal system" to fight the fiduciary standard, "and will continue to bring our members critical tools to help them comply with this rule in the meantime".

Pamela Banks, senior policy counsel for Consumers Union, urged the Labor Department "to resist industry-led efforts to diminish or weaken the rule and the important protections it provides". "It generally involves large sums and there have been many reports of abuse", financial analysis firm Dalbar said Tuesday.

"We urge full compliance and enforcement in order to protect against the harmful practices that threaten the retirement security of millions of workers and retirees", she said.