U.S. Labor Department delays final part of fiduciary
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[November 28, 2017]
By Elizabeth Dilts
NEW YORK (Reuters) - The U.S. Department of
Labor issued an 18-month-delay on Monday for key parts of its retirement
rule, including one that would require brokers to ask clients if they
feel that accounts that charge commissions are in their best interests.
The Labor Department said the delay would give it time to review public
comments received in recent months and to satisfy President Donald
Trump's request in February that it review the cost the rule poses to
the wealth management industry and investors.
The so-called fiduciary rule took partial effect this past summer,
requiring securities brokers at firms like Morgan Stanley and Edward
Jones to charge reasonable fees, make no misleading statements and to do
what is in a retirement saver's best interest.
The parts of the rule now delayed until July 1, 2019, are provisions
that articulate what brokers must do to follow those guidelines. Those
provisions also could create the basis for a claim if a client believes
the broker did not do what is in his or her best interest.
Consumer advocates fear the delay is a sign that the thorniest parts of
the rule will eventually be scrapped.
"The mechanisms that make this rule enforceable in the marketplace are
delayed, and the signal from the Department of Labor is that (those
provisions) are on the chopping block long term," said Barbara Roper,
investor protection director for the Consumer Federation of America.
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A pair of elderly couples view the ocean and waves along the beach
in La Jolla, California March 8, 2012. REUTERS/Mike Blake
The Obama administration crafted the rule in 2016 to eliminate conflicts of
interest in the financial advice that savers receive on retirement accounts. The
original version of the rule limited brokers' ability to earn commissions and
sell some higher-fee products.
Wall Street lobbyists have argued the best-interest contracts and the principal
transactions exemption, also subject to the delay, will reduce the number of
investment products brokers can offer to retirement savers.
They say it will also drive up compliance costs and thereby fees, forcing firms
to drop less profitable investors and small-business 401(k) clients.
"This delay will allow the DOL to conduct a thorough review of the rule...to
ensure investor choice and access to retirement savings advice is protected,"
said Dale Brown, president of the Financial Services Institute.
(Reporting by Elizabeth Dilts; Editing by Peter Cooney)
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