Labor Department to implement Obama’s investment adviser rule
The Labor Department will implement a controversial Obama-era rule for financial advisers on June 9, Secretary Alexander Acosta announced Monday evening in The Wall Street Journal.
Acosta wrote that the Labor Department couldn’t find a legal basis to delay the “fiduciary” rule beyond June 9, the end date of a review designated by President Trump via executive order earlier this year.
“We have carefully considered the record in this case, and the requirements of the Administrative Procedure Act, and have found no principled legal basis to change the June 9 date while we seek public input,” Acosta wrote. “Respect for the rule of law leads us to the conclusion that this date cannot be postponed.”
The Labor Department will begin implementing the rule on June 9, though Acosta said it would continue to explore potential changes to the rule. Firms will be given until 2018 to comply with the rule without penalty.
The fiduciary rule, finalized by the Obama Labor Department in 2016, requires certain financial advisers to disclose potential conflicts of interest to clients. It also expands the types of advisers who are mandated by a “fiduciary” standard to act in their clients’ best interests, not their own.
Business groups and financial firms detest the rule and challenged it in court soon after it was promulgated. They say the rule raises the costs of financial advisory services with burdensome compliance requirements. The regulatory crush, they argue, would make financial advice too expensive for vulnerable and elderly families.
Opponents also say the Labor Department overstepped its legal authority and overruled a peer agency. The Dodd-Frank Act mandated the Securities and Exchange Commission to write the fiduciary rule, but it didn’t under former Chair Mary Jo White. The Labor Department stepped in after progressive activists and politicians rallied around the rule they say helps protect consumers from dishonest financial advisers.
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