The Labor Department’s effort to delay the January 1, 2018implementation date for the fiduciary rule by 18 months will have to beopened for public comment after the Office of Budget and Managementreviews the proposal, according to several stakeholders.

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OMB’s review of the rule could take up to 90 days, as it meetswith and considers input from both proponents and opponents of theoverall rule.

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That process is expected to be exhaustive.

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Cristina Martin Firvida, director of financial security at AARP,told BenefitsPRO that the organization, perhaps the most powerfuland well-funded proponent for implementing the fiduciary rule as writtenwithout delay, has already requested a meeting with OMB.

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Martin Firvida said it is AARP’s understanding that Labor fully intends to open the proposed delayfor public comment. The organization will make the case to OMB thatfurther delay is unwarranted.

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Micah Hauptman, financial services counsel for the ConsumerFederation of America, which has lobbied to Labor that a delay offull implementation of the rule will expose retirement investors tocontinued conflicted advice, said Labor’s proposal seems“predetermined.”

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“They asked the question about whether they should delay and inless than three weeks of the comment deadline sent a proposal toOMB? That’s quite hasty and doesn’t suggest that they engaged inreal thoughtful decision making,” Hauptman said in an email.

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Scores of the financial service and insurance industry’s largeststakeholders—Vanguard, Morgan Stanley, MetLife and Fidelity amongthem—lobbied Labor to delay the rule on the grounds that theDepartment has sent strong signals of its intention to revise therule.

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The CFA and other rule proponents are not holding out hope thatOMB will resist Labor’s intention to delay the rule.

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“It’s unclear if OMB will push back,” said Stephen Hall, legaldirector of Better Markets, a non-partisan advocacy fortransparency in financial markets. “But they should. A delay is sofundamentally at odds with what is best for the public. There is nolegitimate or valid reason to delay this rule. But I fear OMB willgreen light the delay.”

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In order for Labor to delay, or for that matter, revise therule, regulators will have to adhere to what Hall calls thesubstantive and procedural limits to rule-making under theAdministrative Procedure Act.

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Labor’s proposed delay has not been released to the public,which makes it impossible at this point to understand on whatgrounds the proposed delay is being justified.

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One prospect is that delay is needed to provide industry moretime to comply with the rule.

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Another potential justification is that the agency needs moretime to conduct its review of the rule, ordered by PresidentTrump.

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Yet another possible basis is that more time is needed to createstreamlined exemptions for clean shares of mutual funds and otherproduct innovations that emerged subsequent to the rule’sfinalization in 2016.

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Christine Lazaro, director of the Securities Arbitration Clinicat St. John’s University School of Law and a board member of thePublic Investors Arbitration Bar Association, does not think thosepotential justifications satisfy APA’s requirements.

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“I haven’t seen evidence that industry needs more time tocomply,” said Lazaro. PIABA is also advocating against a delay.

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“True, development of new products will take time, but itappears the industry has had sufficient time to develop policiesand procedures capable of complying with the rule,” she said.

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To Lazaro, it appears Labor’s justification for a delay is thatit needs more time to complete its review of the rule.

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“But if Labor doesn’t have new information as to why the ruleshould not proceed, it should not delay for the sole purpose ofreviewing the rule,” added Lazaro.

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Better Markets’ Hall suspects Labor’s possible justificationsmay be across the board.

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“This is part of a process to weaken, if not kill the rule—thatis what’s going on,” said Hall.

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Hall doesn’t believe the position that industry needs more timeto comply is adequate justification to delay the rule under theAPA. “Some firms would like it, but that’s not justification forholding off on these critically important protections.”

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The Trump administration is well within its right to review therule, said Hall. But that right in and of itself cannot justify adelay, he said.

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And industry’s efforts to engineer new products may also requiremore time. “Let them do that all day long. But that’s not arational basis for holding up these protections.”

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Ultimately, the question is whether Labor is abiding by thecountry’s principles of rule-making in seeking a delay of thefiduciary rule, said Hall, who doesn’t think a delay can be legallyjustified.

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Better Markets will be making that case to OMB, regulators atthe Labor Department, and “ultimately to a judge if we feel whatthey are doing violates the law,” said Hall.

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Related: Check out more content at our DOL Fiduciary Rulepage

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Nick Thornton

Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.