On Friday, February 3, 2017, the President signed an executive order requiring the re-examination of the final Fiduciary Rule (81 Fed. Reg. 20946 (April 8, 2016)) set to go into effect on April 10, 2017. The Fiduciary Rule, which was the subject of significant debate, expands the statutory definition of "fiduciary" and requires a broader swath of financial professionals to act in their customers' "best interest," as opposed to following a "suitability" standard.
In the Executive Order, the President directed the Department of Labor to evaluate whether the Fiduciary Rule "may adversely affect the ability of Americans to gain access to retirement information and financial advice." Among other things, the Department is to consider (1) whether the Rule "has harmed or is likely to harm" investors by restricting access to investment offerings, (2) whether the Rule has resulted in "dislocations or disruptions within the retirement services industry," and (3) whether the Rule "is likely to cause an increase in litigation and an increase in the prices that investors" pay for services. If so, then the Department is to propose either rescinding or modifying the Rule.
From a practical perspective, the Executive Order does not change or delay the effective date of the final Fiduciary Rule. We will continue to monitor developments, but for now, it appears those in the financial services industry should continue to prepare for the Rule to go into effect in April. Nevertheless, the status of the Fiduciary Rule is uncertain, and financial professionals should stay informed of the situation.
This client alert is prepared for the general information of our clients and friends. It should not be regarded as legal advice. If you have any questions regarding this update, or for more information about this topic, please contact any of the attorneys in our Financial Services & Investment Management practice group, or the attorney with whom you normally consult.