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Critics of the Department of Labor’s fiduciary rule claim that by letting some portions of the rule take effect in June, the department is standing in the way of President Donald Trump’s directive to review the rule.
But former DOL officials interviewed by Bloomberg BNA say these accusations are greatly exaggerated and ignore how the agency and rulemaking works. One former Obama DOL official told Bloomberg BNA that the department’s delay of the rule had to be signed off on by several political appointees, including acting Solicitor of Labor Nicholas C. Geale.
“The way that that’s been portrayed demonstrates that people don’t understand how things get done,” Sharon Block, who served in the Labor Department under President Barack Obama, told Bloomberg BNA. Block was the principal deputy assistant secretary for policy and senior counselor to the labor secretary.
Several groups--including the Financial Services Institute, the Insured Retirement Institute and the Securities Industry and Financial Markets Association--told Bloomberg BNA that the DOL ignored Trump’s directive to review the rule by allowing the revised definition of the term “fiduciary” and the impartial conduct standard to go into effect in June. The Obama-era rule aims at reducing the allegedly conflicted investment advice given to retirement savers.
“We certainly do believe that the Department of Labor of staff has veered from the direction the president’s memo required,” said Lisa Bleier, managing director and associate general counsel with SIFMA.
Labor Secretary Alexander Acosta, who was sworn in to office April 28, has yet to take part in the review of the rule. The chairman of the Senate Health, Education, Labor and Pensions Committee, Lamar Alexander (R-Tenn.), and other panel members sent Acosta a letter the same day requesting that he conduct “an exhaustive review” of the rule before any part of it becomes applicable.
Contrary to suggestions that career staff played a role in delaying portions of the rule until June, those people just don’t have that kind of sway, Erin M. Sweeney, an employee benefits attorney and of counsel with Miller & Chevalier in Washington, told Bloomberg BNA.
“The career staff at the DOL cannot make decisions about a regulation without sign-off” from the higher-ups, said Sweeney, who worked at the DOL under President George W. Bush.
While department staff working on the rule could have made recommendations about it, the rule would have gone through the solicitor of labor’s office before leaving the building, a former Obama DOL official told Bloomberg BNA.
Political appointees “could have overruled anything the career staff” said before the rule went to the White House, the former official said. “The idea that the career staff pulled the wool over their eyes is ridiculous.” The former official spoke on the condition of anonymity.
But ultimate say on the rule doesn’t lie with the DOL employees, Block said. A regulatory action like this has to go through the Office of Information and Regulatory Affairs at the Office of Management and Budget. In addition, the National Economic Council was most likely involved, she said.
A department spokesman told Bloomberg BNA in an email, “The President’s Memorandum directed the department to review the rule and do an updated analysis to determine whether the rule and exemptions are consistent with the policies of this Administration. The proposal to extend the applicability dates of the rule and related exemptions went through the Administrative Procedure Act process at the Office of Management and Budget. ”
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