The Labor Department’s fiduciary prohibited transaction
exemption to align with the Securities and Exchange Commission’s Regulation
Best Interest has landed at the Office of Management and Budget for review.
Labor sent its fiduciary PTE, Improving Investment Advice
for Workers & Retirees Exemption, to OMB on Tuesday.
Steve Saxon, partner at Groom Law Group in Washington, told
ThinkAdvisor in a Wednesday morning interview that he expects OMB’s review of
the fiduciary PTE to be “very short,” and completed within a matter of days. It
could be “less than a week,” Saxon said.
Because the rule is designated as “economically significant,
that could impact the overall [review] process” at OMB, Saxon added.
If the Biden administration “wants to do something with the
exemption, he may just tweak it some, [and] Biden can revoke” it, Saxon said.
Brad Campbell, partner at Faegre Drinker in Washington, told
ThinkAdvisor that the timing of the final rule landing at OMB “presents
challenges for the Department.”
However, Campbell said, Labor’s proposal “was identified as
a significant rule, which normally requires 60 days before it can become
effective. That would put the effective date after Inauguration Day, providing
opportunities for the incoming administration to try to delay or rescind the
Either way, explained the former head of Labor’s Employee
Benefits Security Administration, “we will all be waiting eagerly to see the
final text once released, and given OMB’s recent history of moving DOL
regulations very rapidly, that may happen within the next two weeks.”
More Views on Final Rule
Fred Reish, partner at Faegre Drinker in Los Angeles, added
that “it is now impossible to publish the final rule in time to prevent the
Biden administration from reviewing and revising it.”
Developing the rule was slowed down at Labor, Reish said,
“by the significant negative reaction from the financial services sector, and
particularly from broker-dealers and insurance companies.”
Due to these concerns, the DOL “decided to hold public
hearings and, I assume, to rewrite parts of the rule. Those steps added weeks, if not months, to
the timeline. As a result, the Trump administration will not have the final say
on this rule,” he explained.
George Michael Gerstein, partner at Stradley Ronon in
Washington, added in a separate Wednesday morning email to ThinkAdvisor that
the Biden administration will likely look “very closely” at the PTE.
“It’s a tie-in with Regulation Best Interest, already in
effect, and market developments may allow this exemption to see the light of
day,” Gerstein said.
Labor’s rule “appears to be on a path to being finalized
before the end of the Trump administration,” added Dan Zelinski, spokesman for
the Insured Retirement Institute.
“With the modifications we [IRI] provided in our comments, a
final rule can provide appropriate protections for retirement investors while
also preserving retirement investors’ access to investment advice and
alternative business models in a manner consistent with Reg BI,” Zelinski said.
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