In the Know: A Q&A on the Latest DOL Fiduciary Rule & SEC Proposal Developments

To say activity in Washington is being closely followed would be an understatement, with the consensus view that the Department of Labor’s Fiduciary Rule is all but officially vacated, and a recent proposal from the Securities and Exchange Commission (SEC) is in the middle of a 90-day comment period. Yaqub Ahmed, senior vice president and head of Defined Contribution – US at Franklin Templeton, leads a discussion on the latest developments with attorney Michael Hadley, partner with Davis and Harman LLP. They outline the SEC proposal and how it might impact financial advisors and their clients.

The US Department of Labor’s (DOL’s) proposal to expand the scope of persons deemed to be a fiduciary has faced a number of challenges. The intent of the DOL Rule was to ensure financial advisors put their clients’ interests above their own financial interests.

Amid ongoing court challenges, the “DOL Rule” faced a deadline of April 30, 2018, to request a rehearing of the Fifth Circuit’s recent decision to vacate the DOL Fiduciary Rule in its entirety. The DOL did not make the request by the deadline, but still has time to file a petition known as a “writ of certiorari” with the Supreme Court to review the lower court decision.

AARP, the nation’s largest nonprofit, nonpartisan organization dedicated to empowering people 50 and older, along with the attorneys general of California, Oregon and New York, twice filed separate motions to intervene, seeking a rehearing “en banc” by the Fifth Circuit. That means all the judges of the court would hear the case, not just the three in the earlier ruling. A three-judge panel denied both requests, so the Fifth Circuit’s “mandate” will revert to the law that existed prior to the DOL Fiduciary Rule.

Meanwhile, on April 18, the Securities and Exchange Commission (SEC) issued a comprehensive set of proposed rules regulating the standard of conduct for broker-dealers, referred to as “Regulation Best Interest.

For more context on these issues, I’ve invited Michael Hadley, partner with Davis and Harman LLP to answer some commonly asked questions on the recent activity.

So Where Does the DOL Rule Stand Now?

Hadley: Here is the current situation. As of June 4, 2018, the Fifth Circuit Court of Appeals has issued an opinion that renders all of the regulatory changes issued in 2016 to the Fiduciary Rule null and void. The DOL can still petition the Supreme Court for review by June 13.