DANIEL GUERNSEY—On April 8, 2016, the Department of Labor (DOL) published a rule (the “Fiduciary Rule”) that “would treat persons who provide investment advice or recommendations to an employee benefit plan, plan fiduciary, plan participant or beneficiary, [individual retirement account], or IRA owner as fiduciaries.” Previously, only financial professionals that gave advice surrounding employer-sponsored retirement plans (e.g., pension funds and 401(k) plans) stood as fiduciaries. When a financial professional is labeled a “fiduciary,” she owes the highest duty of care to her client and must put her client’s interests above her own when making decisions for her client.
However, the applicability date of the Fiduciary Rule was pushed back several times. Originally, the Fiduciary Rule was to become effective as of April 10, 2017. Ultimately, the Fiduciary Rule applicability date was delayed until July, 1, 2019.
The DOL claims that it pushed the applicability date back after receiving a number of public comments that were critical of the Fiduciary Rule, arguing that it would cause confusion and limit the access retired investors would have to financial services. Among the critics of the Fiduciary Rule was President Trump, who opposed the rule for the same reasons as those mentioned above.
However, a recent study found that many of the comments that disfavored the Fiduciary Rule were apparently fake. Mercury Analytics conducted a study and found that 40% of the submitted comments to the Fiduciary Rule were inauthentic. Specifically, Mercury Analytics sent surveys to 345 individuals who submitted comments in opposition of the rule, and 20 out of 50 individuals stated that they never submitted the comments under their name.
Because the DOL used industry opposition as one of the reasons for delaying the applicability date of the Fiduciary Rule, one can only wonder if this revelation will cause the DOL to reconsider pushing back the applicability date of the Fiduciary Rule. True, notwithstanding these fake comments, it still may be that most of the industry or public opposes the Fiduciary Rule. Moreover, President Trump’s letter is not fake and he is clearly opposed to the DOL’s Fiduciary Rule.
The DOL seems very responsive to the criticisms of current presidents. For example, the DOL proposed this same Fiduciary Rule in 2010 but withdrew its proposal 2011. It then re-proposed the Fiduciary Rule in 2015, two months after President Obama Gave a speech calling out the DOL for its inaction. Therefore, it may be that the DOL listens to President Trump and keeps the current applicability date set for July 1, 2019.
There are some external forces that may cause the DOL to reconsider the current applicability date. Jay Clayton, the current Chairman of the SEC, has voiced his support for a uniform fiduciary standard. Faced with this, individuals such as Labor Secretary Alexander Acosta have stated that the SEC and the DOL should work together in developing a fiduciary duty. This, combined with Mercury Analytics’ study, may cause the DOL to reconsider the applicability date for the Fiduciary Rule.
The recent news about fake comments submitted to the DOL might cause the DOL to reconsider the applicability date of the Fiduciary Rule. On the one hand, the SEC and other members of the public may place pressure on the DOL to reconsider the applicability date. However, the Trump Administration has voiced its opposition to the Fiduciary Rule and had supported the delay of its applicability date. Thus, only time will tell what the future holds for the DOL’s Fiduciary Rule.