Dodd-Frank Overhaul Could Cause Fiduciary Rule Mess

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Kristen Ricaurte Knebel

A major overhaul of the Dodd-Frank Act that would also repeal the DOL’s fiduciary rule could cause a mess for the financial services industry if it is enacted after the rule’s June 9 applicability date.

One provision in the Financial Choice Act ( H.R. 10) would permanently put the brakes on the Labor Department rule that aims to reduce the allegedly conflicted investment advice given to retirement savers. In addition, it would prevent the department from going forward with any other fiduciary rule without the Securities and Exchange Commission developing and finalizing a rule first. The SEC had been working toward its own fiduciary rule that would harmonize the different legal standards applicable to professionals who give investment advice, but nothing has materialized yet.

If Congress wants a shot at stopping the fiduciary rule through legislation, they are racing the clock against the rule’s applicability date, Andrew L. Oringer, a partner with Dechert LLP in New York and co-chair of the firm’s ERISA and executive compensation group, told Bloomberg BNA. The problem is, it’s not clear the Senate feels a sense of urgency to pass the legislation before that date, he said.

The legislation was approved by the House Financial Services Committee May 4 on a 34-26 party-line vote. The vote concluded a three-day markup of the bill, during which Democrats slowed the process and unsuccessfully tried to remove various portions of the bill.

Another Avenue

If the bill doesn’t become law by June 9, “it’s a different game because it’s much easier to hold back on a new regulatory initiative before it becomes applicable,” Oringer said. Portions of the rule are set to become applicable June 9. Other portions are delayed until at least Jan. 1, 2018, while the rule is under a presidentially mandated review by the agency.

Many who need to comply with the fiduciary rule have already started and are pushing forward with compliance efforts in anticipation of the rule’s applicability, Jason C. Roberts, chief executive officer at the Pension Resources Institute, told Bloomberg BNA.

“There would be significant sunk costs that are already on the books,” Roberts said. Those costs “will continue to mount while a bill is working its way through to become a law.”

If the legislation were to pass, unwinding things that are already in place “would be a substantial undertaking,” Roberts said.

To contact the reporter on this story: Kristen Ricaurte Knebel in Washington at

To contact the editor responsible for this story: Jo-el J. Meyer at

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