An email from Labor Secretary Alexander Acosta to Sen. Tim Scott, R-SC, leaked to industry opponents of the fiduciary rule by a Scott staffer, said rolling back the rule was Acosta’s top priority, according to reporting on NAPA-net.org and insurancenewsnet.com.

The email suggests Acosta is pursuing options that will stop the controversial rule in a way that will “stick.”

The leaked communiqué comes as scores of Republican lawmakers have called for Acosta to further delay the June 9 implementation date of the rule’s impartial conduct standards, which requires advisors on all qualified retirement investment accounts to act in the best interest of investors.

Several industry organizations have undertaken media and grassroots campaigns, calling on Acosta and Labor to delay the June 9 implementation date until the agency completes the review of the rule ordered by the Trump administration in a February presidential memorandum.

But Acosta has limited, if any options to issue a delay of the June 9 requirement that advisors serve as fiduciaries, according to some industry insiders and at least one attorney expert in the Employee Retirement Income Security Act.

Further delaying the June 9 deadline would require opening a new proposed final rule for comment, which would require more than the 30 days remaining before the June requirement.

“This is an APA issue,” said Erin Sweeney, an attorney with Miller & Chevalier, referring to the Administrative Procedure Act, the federal statute that governs how federal agencies write regulations.

“If DOL thought they could just march in and delay this, they would have already done so,” said Sweeney, who was a senior benefit law specialist at Labor between 2003 and 2007.

“The agency has reached the legal conclusion that they can’t just issue a delay without a further notice and comment period,” she added.

In their letter to Acosta urging delay of the June 9 impartial standard requirement, House Republicans said a primary concern with the rule is that “financial advisors would be forced to move from commission-based advisory accounts to fee-based advisory accounts, and that advisors would be unlikely to afford to continue providing advice to small, fee-based accounts.”

To illustrate that point, the letter uses the example of a $2,000 account, which if charged a 1 or 2 percent advisory fee would generate between $20 and $40 in fees, a level of compensation that would disincentivize investment advice providers from servicing the account.

Proponents of the rule say new robo-advisor capabilities at legacy investment firms will allow small investors continued access to investment platforms, if not one-to-one advice.

Underground mafia at Labor?

News of the leaked email from Sec. Acosta to Sen. Scott comes as “everyone and their kid sister is lining up” to meet with the new Labor Secretary, said Sweeney.

When the Labor Department delayed the original implementation date by 60 days to June 9, several media outlets published editorials claiming that career regulators were acting in open defiance of President Trump’s memorandum to reexamine the impact of the rule.

But Sweeney’s contacts at the Labor Department call the notion of a so-called Deep State “fantastical.”

“Is there an underground mafia at DOL? There are people who really believe that, but it’s not reality,” said Sweeney.

Regulators’ primary reason for delaying, but maintaining compliance with the rule’s impartial conduct standards, was cost, explained Sweeney.

In issuing the final rule to delay the first implementation date, Labor said the cost of doing so will be $147 million this year in unrealized investment gains by retirement investors, a number that was based on the rule’s regulatory impact analysis.

Issuing a longer delay until the completion of the new economic impact analysis would have cost investors exponentially more. Labor has said it expects to complete its analysis before January 1, 2018, when the bulk of the rule is scheduled for implementation.

“They base their numbers on their own regulatory impact analysis, and the DOL has to live with that. But their numbers show this is a very expensive regulation to hold up,” said Sweeney.

Labor justified the $147 million cost of the 60-day delay on the fact that “there is a significant risk of a confused and disorderly transition process, rushed business decisions, and excessive expenses because of deadlines that are now too tight,” according to language in the rule delaying the original implementation date.

Sweeney said one particular clause in Labor’s delay took industry by surprise and may have motivated some the claims of internal mischief by regulators.

The Department said keeping the June 9 impartial conduct standards requirement was motivated “by the prospect of their likely continuation.”

That claim came across as excessively presumptuous to industry opponents, said Sweeney.

“People were up in arms over that,” she said. “It was a mistake, but I think it was accidental. It gave the impression that DOL staff was trying to ram through the impartial conduct standards.”

But the mistake also proves the absence of a Deep State, thinks Sweeney. If regulators were working in a coordinated effort to subvert the Trump administration, they would not have included that language. “It would have telegraphed their intentions, which, if they were working secretly, they would have wanted to hide,” she said.

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DOL's Acosta likely limited in delaying fiduciary rule&rsquo;s June 9 implementation date

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DOL's Acosta likely limited in delaying fiduciary rule’s June 9 implementation date