Financial Regulations Will Stay in Focus for the Foreseeable Future

It’s been a significant week in Washington DC for financial services industry regulations, though you might not know it with the former FBI Director James Comey’s testimony before the Senate Intelligence Committee dominating headlines.

On Thursday, June 8, the House of Representatives voted largely along party lines to pass the Financial CHOICE Act 233-186 and on Friday, June 9, the Department of Labor’s (DOL’s) much debated Fiduciary Rule begins to take effect. These measures could significantly change the financial services industry’s regulatory environment, though they have a long way to go before they are finalized.

Secretary of Labor Alexander Acosta announced on May 22, 2017 that the Department of Labor’s Fiduciary Rule would take effect on June 9, 2017, ending speculation that the controversial rule would face further delays. While the DOL recognized that they couldn’t legally delay the rule any further, there is a transition period until January 1, 2018 that will allow firms and advisers to comply with all measures set forth in the rule. 

It’s important to note that this transition period also allows for further discussion—and possible changes—to the Fiduciary Rule. The DOL stated in a set of published FAQs:

“By Memorandum dated February 3, 2017, the President directed the Department to conduct an examination of the Fiduciary Rule to determine whether it may adversely affect the ability of Americans to gain access to retirement information and financial advice. The Department is engaging in a careful analysis of the issues raised in the President’s Memorandum and it is possible, based on the results of the examination, that additional changes will be proposed.”

The debate over the Fiduciary Rule is far from over. The DOL, as stated above, will continue to analyze the potential impacts of the rule, and we expect that the rule will be the center of debate by industry lobbyists, lawmakers and other stakeholders over the coming months. 

The Financial CHOICE Act is another possible remaining hurdle for the Fiduciary Rule. Though the reforms set forth in the Financial Choice Act would be sweeping, much of the discussion in the media has centered around its impact to the DOL’s Fiduciary Rule. In its current form, the Financial CHOICE Act would repeal the DOL’s Fiduciary Rule and significantly limit the ability of the Secretary of Labor to change the definition of a fiduciary going forward.

The Financial Choice Act House has a tough road ahead of it, as the bill would require 60 votes to pass in the Senate, which may be difficult in this political environment. A likely scenario may be that the different components and/or amendments to the Financial Choice Act may be parceled out and repackaged into different legislation that could garner more bipartisan support.

And regarding the Fiduciary Rule, the debate will continue at least through the remainder of the year. The DOL will continue to consider changes to the Rule, and will listen to suggestions from interested parties. The Securities and Exchange Commission is also entering the discussion, issuing a request for public comment on the Rule, asking for “robust, substantive input that will advance and inform the SEC’s assessment of possible future actions.”

These are interesting times as the current administration continues to look for ways to rewrite or remove many of the rules and regulations that have shaped the financial industry over the past seven years or so. The fate of the Fiduciary Rule, and other regulatory reforms like the Financial Choice Act, will be the source of ongoing discussion for the foreseeable future.

Terry Dunne is Senior Vice President and Managing Director of Retirement Services at Millennium Trust Company, LLC.

The material in this article is presented for informational purposes only. The information presented is not investment, legal, tax or compliance advice. Millennium Trust Company performs the duties of a directed custodian, and as such does not provide due diligence to third parties on prospective investments, platforms, sponsors or service providers and does not sell investments or provide investment, legal, or tax advice.