Overview
Presidential Actions Affect DOL's Fiduciary Rule and Other Financial Services Regulation
Today, the White House issued two releases of import to the financial services community: a memorandum to the Department of Labor (DOL) directing it to re-examine the fiduciary rule, and an executive order on financial services regulation. Both actions are discussed in more detail below.
Memorandum Directing DOL to Re-Examine the Fiduciary Rule
President Trump released a memorandum instructing the DOL to re-examine the fiduciary rule to determine whether it may have an adverse impact on: consumers’ access to retirement savings advice or products; the broader retirement services industry; or increased litigation risk, and an increase in the price of retirement services. Notably, the memo is silent on whether the Department should delay the rule’s April 10 applicability date while it conducts this assessment.
The memo specifically instructs the DOL to prepare “an updated economic and legal analysis” concerning the aforementioned issues. To the extent it concludes that the rule will have adverse effects in any of these areas or concludes “for any other reason” that the rule is inconsistent with the administration’s priorities of empowering Americans to make their own financial decisions and save for retirement, the DOL is directed to “publish for notice and comment a proposed rule rescinding or revising the [rule], as appropriate and as consistent with law.”
While the memo signals some willingness on the part of the administration to re-open the contentious rule (and potentially withdraw the measure altogether or significantly amend its content down the road), the release does not contain a clear directive to delay the rule’s applicability date while the DOL conducts its analysis.
Interestingly, the memo calls for a formal rule-making process only if the DOL concludes that amendment or rescission is warranted. However, if the DOL opts to delay the rule’s applicability date on the basis of further policy and legal analysis—a move within the DOL’s authority without explicit direction from the White House—it likely will require some formal process (e.g., public notice of a proposed delay and solicitation of public comments on the desirability and/or necessity of the delay, as well as comments on the merits of the impact-related inquiries discussed above) to avoid litigation challenges under the Administrative Procedures Act.
The acting Secretary of Labor, Ed Hugler, already issued the following statement indicating that a delay of the applicability date may be forthcoming: “The Department of Labor will now consider its legal options to delay the applicability date as we comply with the President’s memorandum.”
We will closely monitor any further responses from the DOL to President Trump’s memorandum, and provide additional updates, as appropriate.
Executive Order on Financial Services Regulation
President Trump also issued an executive order instructing the Treasury Department, in consultation with other Financial Stability Oversight Council agencies, to report to the White House within 120 days (and periodically thereafter) on the extent to which current laws, treaties, regulations, guidance, etc., promote or inhibit the Administration’s “Core Principles” for regulating the US’s financial system. According to the order, those principles include: empowering Americans to make independent and informed financial decisions; prevention of taxpayer-funded bailouts; fostering economic growth and vibrant markets through more rigorous analysis of systemic risk and market failures; enabling American companies to be competitive with foreign firms in domestic and foreign markets; advancing US interests in international negotiations; making regulation efficient, effective and tailored; restoring public accountability within the federal financial regulatory agencies; and rationalizing the federal financial regulatory framework.
While the order only directs the agencies—for now—to study and report, it may be viewed as a springboard into broader Dodd-Frank reform efforts.
We hope this is helpful. Please do not hesitate to contact us with any questions.
