US Labor Secretary: Fiduciary rule to take effect June 9

Alex Acosta

Alex Acosta

But it's leaving open the possibility that deep changes to the rule will still be made.

The department's rule, which requires brokers offering retirement investment advice to act in the best interest of their customers, has been heavily criticized by Republicans and Wall Street amid concerns it may make investment advice too costly.

As confirmed in the FAQs, the standard for financial advisors who are fiduciaries under the amended and soon-to-be-effective rule can not accept otherwise prohibited compensation in connection with an investment recommendation unless: (i) the advice they give is in the best interest of the retirement investor, which requires that the advisor exercise appropriate care in making his/her recommendation and that the recommendation be in the best interest of the client and not the advisor or his/her firm; (ii) the advisor charges no more than reasonable compensation; and (iii) the advisor makes no misleading statements about the recommendation, his or her compensation and/or any conflicts of interest.

Despite efforts to delay it further, the so-called fiduciary rule will get put in place June 9, Acosta wrote in an op-ed for the Wall Street Journal. "Trust in Americans' ability to decide what is best for them and their families leads us to the conclusion that we should seek public comment on how to revise this rule".

Secretary of Labor Alexander Acosta said his decision to not further delay implementation of the fiduciary rule was based on the rule of law.

Americans have about $14 trillion in retirement savings - in 401 (k) retirement accounts, other defined-contribution plans such as federal employees' plans and in IRAs. The Department is also aware that after the fiduciary duty rule and PTEs were issued firms have begun to develop new business models and innovative market products to mitigate conflicts of interest.

Critics of the regulation claim that it will restrict access to retirement services for middle and low-income Americans along with small businesses while also imposing new costs. "That means the Trump (Labor Department) will now have to properly draft, propose and, if appropriate, finalize a different rule after allowing for full public input and participation".

The Department of Labor has a confusing message about its fiduciary rule. Trump ordered a government review of the Dodd-Frank financial oversight law, which he has called a "disaster".

"NAPA recognizes that many in the industry are going to be concerned about where we go from here", commented American Retirement Association CEO and NAPA Executive Director Brian Graff.

In formal guidance, the Labor Department said it would "not pursue claims" against advisors who work "diligently and in good faith" to comply with the rule until it fully takes effect on January 1.

The son of Cuban immigrants, Acosta has been a federal prosecutor, a civil rights chief at the Justice Department and a member of the National Labor Relations Board.

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