The end of the Fiduciary Rule??

https://benefitslink.com/src/ctop/Chamber_v_DOL_5thCir_Denial_of_Motion_to_Intervene_05022018.pdf

Seems that way...  The DOL is not defending it.

Curious to know what others think or know (i.e, because of legal knowledge about the process) regarding the future of this thing...

It is possible that the Government decided to skip asking for a rehearing in the Court of Appeals and will file a petition for cert. with the Supreme Court, which it still has some time to do, but the smart money says this will not happen.  It is possible, however, that we may see Fiduciary Rule 3.0, depending upon how satisfied or not the current Administration is with the SEC's final rulemaking (or the next Administration).  Bottom line is that many feel that retirement investors need greater protection, if for no other reason than Uncle Sam has a claim to a large piece of that retirement money.     

I don't disagree that many say we need greater protection.  But that doesnt appear to be the focal point of this administration.  Rather "business friendly" is their modus operandi - and the fiduciary rule is the polar opposite of that...

And the SEC rule (which came out udner Trump and so presumably meets with his approval) stops short of a fiduciary rule.

And the whole retirement system hangs in the balance while we wait!

SEC is not an executive branch agency.

I did not know that...  Do you think though that perhaps Mnuchin got his 2 cents in before it was finalized?  

He may have gotten it in but the Commissioners, although appointed by whoever the President is at the end of their five-year terms, tend to act independently with heavy reliance on professional staff.  While it's true that there is a 3-2 GOP advantage currently, it's a completely different relationship then, say, the relationship between the President and the Secretary of Labor.

Of the currently serving five Commissioners, two are Democrats, two are Republicans, and the Chairman is an Independent.

In the April 18 meeting that concluded with a 4-to-1 vote for allowing proposed rulemakings to be published (which has not yet happened), everyone but the Commissioner expressed dissatisfaction with the content of the to-be-proposed rules.

46 minutes ago, Fiduciary Guidance Counsel said:

Of the currently serving five Commissioners, two are Democrats, two are Republicans, and the Chairman is an Independent.

In the April 18 meeting that concluded with a 4-to-1 vote for allowing proposed rulemakings to be published (which has not yet happened), everyone but the Commissioner expressed dissatisfaction with the content of the to-be-proposed rules.

 

 

But they are just that, proposed.  My understanding is they proposed them specifically for the purpose of receiving comments on how they should be modified and it appears they are hoping for some wise guidance from the ether to help them develop the actual rules that will ultimately be adopted. All the organizations will be on top of this (I know we will at ASPPA Government Affairs).

Larry, you should get this question on the ASPPA IRS Q&A - settle this once and for all!

The way it was explained at the Phila ASPPA conference was that if the DOL did not appeal, and the other appeals were denied, then the rule is kaput.  And that's what happened.

I don't know what was said but if when they said "appeal" that included the Gov't going to the Supreme Court then what was said was true, but the Gov't still has time to petition the Supreme Court.  I suppose that if that happens the rule will be technically dead but subject to possible  resurrection by the Supreme Court, in which case it will only have been temporarily dead. 

There’s really almost no doubt about the Labor department’s 2016 investment-advice fiduciary rule.  At last week’s ASPPA Eastern Regional Conference, I said it was almost certain the Secretary of Labor would not seek a rehearing of the appeals court’s decision to vacate the rule and its related exemptions.  Also, I mentioned both motions to intervene (by three States Attorneys General, and by the American Association of Retired Persons) and mentioned the possibility that taking time to decide the motions might slightly delay the court’s mandate.  Yesterday, the court denied both motions.  So, the court’s mandate to vacate the 2016 rule will issue next week.  While the Secretary of Labor still has time remaining to petition the Supreme Court to review the appeals court’s decision, I believe the Secretary will not do so (and I’m unaware of any lawyer who thinks differently).  Also, the Secretary has not asked the appeals court for a stay of its mandate.

Larry Starr is right that the SEC’s April 18 vote was only to approve publishing three notices of proposed rulemakings.  Developing a rule seems likely to take years.  And a resulting rule could face challenges in courts.

I'm doing a training on something related to this soon.  Does everyone agree that although the rule is pretty much dead that the world already conformed to it in large degree?  In other words, if you want to understand how broker/dealers have structured their businesses today, the fiduciary rule is just part of the landscape today.

Also, were there broker/dealers who actually entered into BIC agreements?  I guess they no longer need the PT Exemption that the BIC afforded but I am curious to know if there are BIC's out there today.

Very unlikely that there are any BICs out there, and if there were they were terminated.  Remember, temporary relief was granted some time ago which would have run through next summer that you only needed to comply with the impartial conduct standards, but didn't need to enter into a contract to be covered by the exemption.  

To be clear though, they do not need to comply with the impartial conduct standard any more though right?

Regardless, my assumption is that "conflicted compensation" is probably almost entire nonexistent anymore. Would that be a fair statement?

I'll just say that if the Rule is dead, so is BICE.  And no, I don't know if that is a fair statement.  If you are a non-fiduciary broker-dealer, there is nothing to prevent you from giving conflicted advice or, as you put it, receiving "conflicted compensation," assuming the FINRA suitability standard is satisfied, which I understand to be a very low bar.  Note the irony:  If a broker-dealer's true relationship with an ERISA or IRA client is such that he satisfies the old 5-part test for fiduciary status, and with BICE gone, as a general rule his/her level of compensation cannot be impacted by the product sold.

The appeals court's March 15 decision vacates not only the 2016 investment-advice fiduciary rule but also the new and revised prohibited-transaction exemptions adopted in the same rulemaking.  When the court's mandate issues next week, the Best Interest Contract Exemption no longer is available to anyone, including a person that is a fiduciary under the 1975 rule (if the statute is ambiguous and the 1975 rule is a permissible interpretation of the statute) or, more directly, the statute.

What a cluster....

jpod, what I mean by conflicted comp being almost nonexistent is that all the major broker/dealers changed their comp structures in anticipation of the new rule.  Do you agree?  Pretty much every plan I work on, something was done, and that change often included switching to an RIA arrangement.  OR the advisor completely dialed back on any investment advice whatsoever and engaged a 3(21) or a 3(38) and focused exclusively on education.

I have no numbers to back me up here and I am fishing for people's thoughts in terms of whether or not poeple agree that to a near universal extent the ERISA plan world moved into the new Fiduciary Rule a while ago and there they'll stay.  If for no other reason then all the attention/bad publicity their conflicted advice got them.

For employment-based retirement plans, changes made in response to the 2016 investment-advice fiduciary rule are likely to continue beyond the rule's legal effect.  That was the theme of my CE session at last week's ASPPA Eastern Regional Conference.

I agree with both Austin's and Peter's observations about the employer plan market.  For IRAs, I think it still is or will go back to the Wild Wild West, and that's where the real abuse was (particularly with annuity products) that caused the last Administration to go down this road in the first place.  The money in IRAs will explode over the next 5-15 years as boomers who have been in DC plans for most of their working lives retire.  

7 minutes ago, jpod said:

The money in IRAs will explode over the next 5-15 years as boomers who have been in DC plans for most of their working lives retire.

Great point... Hopefully they will get their act together before all that money gets dumped into piece of ____ variable annuities for the enrichment of the unscrupulous...

Quick question: Did anyone in the retirement business get out to avoid complying with the new rules?  I feel like I have heard stories of firms that either sold their lines of business or simply resigned.

13 hours ago, austin3515 said:

Quick question: Did anyone in the retirement business get out to avoid complying with the new rules?  I feel like I have heard stories of firms that either sold their lines of business or simply resigned.

I can't give you any "specifics" about those that got out of the business because of the "new and now defunct" (for now) fiduciary rule, but I do know that several providers "shopped" their recordkeeping shops because their business models could not feasibly comply (i.e. their business model was almost exclusively based on cross-sell opportunities and rollover capture into their retail IRA products).

I know this because we've been a buyer - and reviewed some of the offerings.....

On 5/3/2018 at 7:54 PM, austin3515 said:

Quick question: Did anyone in the retirement business get out to avoid complying with the new rules?  I feel like I have heard stories of firms that either sold their lines of business or simply resigned.

I know of one specifically that got out because he could not continue his business model. Now, he just sells the products and does not provide any administration.

Met Life and AIG were the examples I couldn't remember...

http://www.investmentnews.com/article/20160229/FREE/160229937/metlife-is-second-major-insurer-to-exit-the-brokerage-business-in