The executive order signed by President Donald J. Trump Friday indefinitely delays the Department of Labor fiduciary rule.
That means the April 10 deadline is on ice. However, since the rule was published in the Federal Registry April 6, 2016, getting rid of it permanently will be more difficult.
“This is exactly the kind of regulatory overreach that the president was put into office to stop,” spokesman Sean Spicer said. “There are better ways to protect investors and the Trump administration will be seeking ways to do so.”
The administration can kill the rule long-term via three different routes: through legislation, new regulation, or via a court decision.
A new regulation would undo the mandates set forth in the fiduciary rule would enjoy the highest probability of success. But that is a lengthy process that includes public comment and public hearing requirements.
A victory by industry opponents in court would surely be most welcomed by the administration. But plaintiffs have lost two cases in Washington, D.C., and Kansas federal courts.
Dallas federal Judge Barbara M.G. Lynn announced Thursday that she intends to rule by next week on the U.S. Chamber of Commerce-led lawsuit against the DOL fiduciary rule.
The administration will certainly wait to see how Lynn rules before making any moves.
A Big Clue?
The administration might have tipped its hand on a long-term strategy with Friday’s photo-op of Trump signing the executive order freezing the fiduciary rule.
Hensarling chairs the House Financial Services Committee, which passed the Financial CHOICE Act in September. The sweeping financial reform bill seeks to replace the Dodd-Frank Act and kill the DOL fiduciary rule.
At the time, Hensarling hailed the bill as a remedy for “growth-strangling regulation.”
Among the many changes the bill proposes, it would block the DOL from implementing its fiduciary rule by incorporating it into the Retail Investor Protection Act, which passed the House last year.
Introduced by Wagner, the RIPA requires the Securities and Exchange Commission to move first on a fiduciary rulemaking before the DOL can act.
After he signed the executive order, Trump deferred to Wagner.
“What we’re doing is we are returning to the American people, low- and middle- income investors, and retirees, their control of their own retirement savings,” Wagner said. “This is about Main Street, and it’s been a labor of love for me for over four years.”
Would Trim Dodd-Frank, Too
The Financial CHOICE bill eliminates several Dodd-Frank provisions, including federal “bailouts” and the Volcker Rule, which restricts trading activities at banks.
The downside of the legislative route is opposition from Democrats. Sens. Elizabeth Warren, D-Mass., and Bernie Sanders, I-Vt., have been outspoken about Wall Street abuses and are unlikely to permit legislation undoing the regulatory framework without a fight.
Of course, Trump thrives on fights and might not be concerned about the difficulties ahead.
Under CHOICE — which stands for Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs — the Financial Stability Oversight Council would no longer be able to designate risky non-banks and others as “systemically important financial institutions.”
The FSOC was created by Dodd-Frank to review the systemic risk to the capital markets presented by large, global financial institutions. MetLife has fought the designation.
The FSOC’s authority to break up a large financial institution if the Federal Reserve finds that the firm “poses a grave threat to the financial stability of the United States” would also disappear if the bill is passed.
Perhaps most controversial, the bill would require the Consumer Financial Protection Bureau to be subject to bipartisan oversight and congressional appropriations. A cost-benefit analysis performed by the Office of Economic Analysis would be required to support all new CFPB rules.
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