Overview

On Friday, President Trump issued a Memorandum to the Secretary of Labor concerning the investment advice "fiduciary" rule under the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), which is scheduled to be "applicable" on April 10 (the "Fiduciary Duty Rule"). 

As the exciting Super Bowl LI game showed – even in an apparent blow out in the fourth quarter – there can be surprises. The final text of the Memorandum differs in some material respects from the text that had been reported by several mainstream press sources and which was initially broadcast by some industry groups, prompting some confusion.

No Stated Delay; Consider Impacts of the Rule

The key difference between the final text of the Memorandum, and what had been reported in many sources, is that the final text of the Memorandum contains no stated delay of the applicability of the Fiduciary Duty Rule. The Memorandum directs the Department of Labor to examine the rule and determine whether it "may adversely affect the ability of Americans to gain access to retirement information and financial information"; and whether or not the rule:

  • Has harmed or is likely to harm investors due to a reduction of Americans' access to certain retirement savings offerings, retirement product structures, retirement savings information, or related financial advice;
  • Has resulted in dislocations or disruptions within the retirement services industry that may adversely affect investors or retirees;
  • 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.

Further, if the Department makes an affirmative determination as to any of the above considerations – or if it concludes for any other reason after appropriate review that the Fiduciary Duty Rule is inconsistent with priorities set forth in the Memorandum, the Memorandum directs the Department to publish for notice and comment a proposed rule rescinding or revising the Fiduciary Duty Rule, as appropriate and as consistent with law.

Department Follow Up Statement

Notably, after the Memorandum came out, the Department of Labor issued a statement stating that it will now "consider its legal options to delay the applicability date as we comply with the President's memorandum." www.dol.gov/newsroom/releases/opa/opa20170203 

"Fiduciary" Imitates Football

As the Department now "considers" its legal options, it's important to focus on the offense, defense and the referees. The variability of the political – and not just the timing of the confirmation of a new Labor Secretary – remains much like a 12th man on the field. Conventional wisdom would suggest that the "reconsideration" contemplated by the Memorandum implies at least some delay. 

But it is not certain how much or when any such delay would be announced. In addition, there are likely many who believe that the rule "has already resulted in" dislocations or disruptions within the retirement services industry that "may" adversely affect investors. While senior Administration officials have evidenced an intent to delay, rework or repeal the rule, we think it important that everyone continue to think about their "fiduciary" game strategy seriously while exhibiting prudence about clock management. Overtime may or may not be an option.

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