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Clayton: SEC Fiduciary Rule on Track Despite DOL Court Defeat
ThinkAdvisor | March 19, 2018 at 10:16 AM
The 5th Circuit Court of Appeals ruling issued Thursday torpedoing the Labor Department’s fiduciary rule isn’t impeding the Securities and Exchange Commission’s efforts to write its own fiduciary rule, the agency’s chairman, Jay Clayton, said Monday.
“Seventy-two hours later” after the 5th Circuit Court of Appeals struck down Labor’s fiduciary rule, “it hasn’t affected the way I’m approaching this” fiduciary rulemaking at the SEC, Clayton said during a question-and-answer session at the Securities Industry and Financial Markets Association’s annual compliance conference, held in Orlando, Florida.
Ken Bentsen, president and CEO of SIFMA, queried Clayton on how soon the agency would release its own fiduciary proposal, asking if it would be “soon.”
Clayton responded: “Soon is fair. From my perspective, the sooner the better. I’m not sitting on this.” Bentsen asked, does the 5th Circuit decision “affect [the SEC’s] timing” on releasing its own fiduciary rule?
“I think there’s a lot going on there [in the ruling] for what it means for the Department of Labor,” Clayton replied. “I haven’t had any discussions with the Department of Labor on what it means from a broader perspective of administrative law and the approach to administrative law. We’ll see, but as far as I’m concerned, we’re moving forward.”
Gibson Dunn: There is no Circuit split over fiduciary rule; decision applies nationwide
BenefitsPRO | March 19, 2018 at 06:12 PM
Gibson Dunn, the law firm that successfully argued to vacate the Labor Department’s fiduciary rule before the 5th Circuit Court of Appeals, says the 2-to-1 decision in favor of industry opponents of the rule applies “nationwide.”
Citing the Administrative Procedure Act, the law that governs federal agency rule making, and Black’s Law Dictionary, attorneys for the firm said the ruling has the effect of the removing the fiduciary rule from the books.
“Under the APA, ‘vacatur’ is a remedy by which courts ‘set aside agency action’ that is arbitrary and capricious or otherwise outside of the agency’s statutory authority,” wrote attorneys for Gibson Dunn, including Eugene Scalia, in a client update.
The consequence of the 5th Circuit’s decision is to delete the fiduciary rule. “Because the effect of vacatur is, in essence, to remove a regulation from the books, its effect is nationwide,” wrote Mr. Scalia and a team of Gibson Dunn attorneys.
Since the decision was released last week, some attorneys in press reports have speculated that the fiduciary rule is still in effect. Other reports have suggested the decision may only impact investment and insurance providers and distributions within states under the 5th Circuit’s jurisdiction.
But the impact of the decision is not as ambiguous as some reports claim, according to Gibson Dunn.
With fiduciary rule seemingly KO'd, what do firms do now?
Financial Planning; March 19 2018, 2:40pm EDT
A federal court decision may have vacated the fiduciary rule, but firms and advisors aren't rushing to overhaul compliance policies ― at least not yet.
Wirehouses, regional and independent firms marshalled considerable resources over the past two years in order to be in compliance for the Department of Labor regulation. They hired additional compliance staff, slashed fees and redesigned compensation plans, among other moves, but now, the court ruling has scrambled the regulatory landscape.
Given the still unsettled nature of the issue ― the Labor Department may appeal the ruling to the Supreme Court and the SEC is developing its own standard ― many firms and advisors are taking a wait-and-see approach.
"I think they have to stay the course at least until May because many firms have adopted policies and procedures that are consistent with the rules and exemptions, and to some degree have made statements to clients about what they are planning on doing," says Bruce Ashton, a partner at law firm Drinker Biddle & Reath.
Changing up compliance plans runs several risks, not least that a firm could be found out of compliance should the fiduciary rule ultimately survive.
The Labor Department has 45 days to appeal the 2-to-1 ruling by the U.S. Court of Appeals for the Fifth Circuit, which was handed down last week. The department, which is currently reviewing its regulation for possible revision, has not yet indicated what approach it will take.