Trial Magazine

The U.S. Department of Labor (DOL), despite intense opposition from the financial industry, recently finalized its commonsense fiduciary rule requiring retirement advisers to act in their clients’ best interests. The rule would save retirees $17 billion per year, according to the Council of Economic Advisers’ report on the costs of receiving conflicted advice. (Read the report at https://tinyurl.com/ycvjtkn9.)

Developed over many years in President Obama’s labor department, the final regulation is a forward-thinking rule that would protect retirees with minimal impairment to the industry that so vigorously opposed it. Or, at least, that’s what we thought. Now manned by industry insider (and former bank president) Andrew Acosta, the DOL has attacked this vital regulation. And, once again, AAJ is fighting back.

Shortly after he was inaugurated, President Trump issued an executive order directing the DOL to conduct a thorough review of the fiduciary rule. Secretary Acosta has repeatedly pushed back the rule’s most important provisions, such as the so-called “best interest contract” exemption, which permits firms to continue using many of their current compensation models as long as they acknowledge their fiduciary status, give prudent and impartial advice, disclose potential conflicts of interest and information about their revenue models, avoid misleading statements, and receive no more than reasonable compensation.

Additionally, Acosta has directed the department to stop defending parts of the rule—including the prohibition on class action waivers in financial adviser contracts—in recent lawsuits that industry members have brought against the department.

After finding no legal recourse to continue delaying implementation of the full rule, Acosta issued an immediate request for information (a legal tool agencies use to begin the process of repealing a rulemaking) about delaying only the most crucial provisions for an additional 18 months—or until spring 2019. Even though the rule is nominally effective, the department plans to delay the best interest contract exemption until it can design a watered-down, industry-approved version of the rule.

With retirement savers already burdened with stagnating middle-class wages, the Economic Policy Institute estimated that previous delays have already cost retirement savers an estimated $7.6 billion over the next 30 years, and an additional 18-month delay of the rule’s key provisions will cost them nearly $11 billion more over the next 30 years. (Read more at https://tinyurl.com/y6wt2rhu.)

The delay may be designed, in part, to buy time for the U.S. Securities and Exchange Commission (SEC) to develop its own standard-of-conduct regulation, which it has indicated some interest in doing. But consumer advocates should express a healthy skepticism about the commission’s intent.

AAJ is closely monitoring the DOL’s decision-making as we move forward in this uncertain time, and we are prepared to do everything possible to protect consumers from being defrauded. We are working diligently with other consumer protection and civil rights organizations to respond to the continual attacks on this crucial regulation. People saving for their retirement rely on their brokers and advisers to help them realize their dreams. The fiduciary rule holds these banks and advisers to the appropriate standard that people expect when asking them for advice for their future.

Are you ready to fight back? Help AAJ’s advocacy campaign by contributing to the Voluntary Membership Assessment (www.justice.org/fightback). If you have already contributed, thank you. You can also submit comments to public DOL and SEC rulemakings through the government portal at www.regulations.gov.

Gabe Lezra is AAJ’s regulatory and federal relations counsel. He can be reached at gabe.lezra@justice.org. To contact AAJ Public Affairs, email advocacy@justice.org.