By Jeffrey Albertson, Jr./Atlanta, GA. 26 May 2017
Back in February, President Donald Trump signed a presidential memorandum on the Fiduciary Rule, directing the Department of Labor to delay implementation for 180 days to “examine” the impact on American’s access to retirement and financial advice. Almost a fortnight after the memorandum, then Nominee for Labor Department Secretary Andrew Puzder withdrew from nomination after records from his 1988 divorce revealed spousal abuse accusations. It should be noted however, that his ex-wife later recanted those accusations, but a video from the “The Oprah Winfrey Show” ultimately dissuaded Republican and Democratic Senators.
Mr. Trump’s second nominee R. Alexander Acosta, the then dean of Florida International University College of Law and former U.S. Attorney was confirmed on April 27 by a 60-38 vote. While at one time deregulation of the financial services industry may have been a preeminent issue, the on-going investigation into alleged Russian hacking has sided lined the Trump Administration’s domestic legislative agenda. Writing in the Wall Street Journal earlier this week, Labor Secretary Acosta indicated the rule will remain unchanged during partial implementation on June 9, because of “no principled legal basis,” but will be opened to public notice and comment in accordance with the Administrative Procedures Act before complete roll-out on January 1, 2018. Mr. Acosta suggested the Securities and Exchange Commission (SEC), which declined to open the initial rule-making process on the Fiduciary Rule, “has critical expertise” in regulation of the financial services industry and would be better suited than the Department of Labor.
The Fiduciary Rule requires that brokers giving retirement advice and selling investments must comply with the “best interest fiduciary standard,” which requires putting a client’s interests above their own. The best-interest standard would end the common industry practice of steering clients into high-priced strategies and products, even when comparable lower-cost options are available. Last May, Congress passed joint-resolution seeking to nullify the rule, but did not have the votes to override President Barack Obama’s veto. In the days after the President’s memo, Chief Judge Barbara Lynn of the U.S. District Court for the Northern District of Texas issued an 81-page ruling that “put a stake through the heart of [the financial] industry’s efforts to destroy this common-sense rule,” said the legal director of Better Markets told Reuters. The Department of Labor has successfully defended the rule three times; in Washington, D.C., Kansas, and most recently in Texas.