Obama-era rule on financial advisers to go forward, for now

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Labor Secretary Alexander Acosta today announced that the Department of Labor will not delay the June 9 effective date for the fiduciary rule, which greatly expanded the definition of who counts as a "fiduciary" under the Employee Retirement Income Security Act and the Internal Revenue Code.

The fiduciary rule, which was more than six years in the making, sets higher standards for the advice brokers give to retirement savers.

In an essay for the Wall Street Journal that was published Monday night, Acosta said the department "found no principled legal basis" for delaying the rule any further.

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The DOL added, "Many of the most promising responses to the fiduciary rule, such as brokers" possible use of "clean shares' in the mutual fund market to mitigate conflicts of interest, are likely to take significantly more time to implement than what the department envisioned when it set January 1, 2018, as the applicability date for full compliance with all of the exemptions' conditions".

SO LONG, BICE?The DOL may be alluding to stripping the best-interest contract exemption, a provision of the rule the industry views as particularly onerous, of its present conditions in place of something "less administratively difficult" if a brokerage uses clean shares with clients, Mr. Humphrey said, qualifying this explanation as an educated guess. "We will do so while respecting the principles and institutions that make America strong".

Dale Brown, head of the independent broker-dealer trade group, the Financial Services Institute, said in a statement that the decision not to further extend the DOL fiduciary rule's applicability date "will push the cost of retirement advice and planning services out of the reach of Main Street investors" and promised to "work with Secretary Acosta and Congress and through the legal system to bring clarity to our members". The rule is meant to discourage brokers and other financial professionals from putting retirement-plan assets into products that pay high commissions or profit-sharing compensation to the brokers-a practice that's now legal as long as the investments can be portrayed as "suitable" for the customer. Firms will be given until 2018 to comply with the rule without penalty.

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Acosta also hopes the SEC "will be a full participant" in drafting a fiduciary rule, which the commission has so far declined to move on.

However, he stressed that the law is being implemented out of "respect for the rule of law [leading] us to the conclusion that this date can not be postponed", and said "additional public input on the entire Fiduciary Rule" was "necessary" and would be sought. The Labor Department stepped in after progressive activists and politicians rallied around the rule they say helps protect consumers from dishonest financial advisers. "It generally involves large sums and there have been many reports of abuse", financial analysis firm Dalbar said Tuesday.

All of this suggests that Acosta may be envisioning incremental changes to the Obama administration rules rather than full repeal. Trump has also ordered a review of the rule.

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