Fred Reish Addresses OMB Review of DOL Fiduciary Rule With InvestmentNews

In “Expect a stronger, more lawsuit-proof fiduciary rule very soon,” InvestmentNews spoke to benefits and executive compensation partner Fred Reish about the Department of Labor (DOL) sending a final version of its fiduciary rule to the Office of Management and Budget (OMB).

It is notable that the deadline for public comments was Jan. 2, 2024, for a rule that was proposed at the end of October 2023 and that is now in its final form, said Reish. Evaluating a mountain of comments from the public and industry groups during that time and getting a finished document to the OMB Mar. 8, 2024, was no easy task, he continued.

“That is very, very fast for the government to move and indicates the priority the DOL has put on this. You almost never see a regulation or exemptions finalized that quickly,” Reish explained. “Roughly six weeks from now, the final rules could be released by the OMB, and the DOL could publish them in the Federal Register.”

The DOL has likely been coordinating with the OMB to further expedite the fiduciary rule, Reish noted. After publication, the rule would become final in 60 days, although the “applicability date,” or the deadline for complying with it, could be Jan. 1, 2025. “My opinion is that they will want the rules to be applicable before the next president is sworn in,” Reish stated. “That way, everybody will be substantially in compliance at least before the next administration takes over.”

Reish added that the DOL could also revise part of the prohibited transaction exemption requirements that would allow the agency to revoke eligibility for firms that are convicted of serious crimes or have patterns of noncompliance with rules. That is potentially a major issue for institutional-sized companies with international operations, as the proposed rule included foreign convictions, he said. It could mean that the DOL would have the ability to essentially stop rollover businesses for some broker-dealers and insurance companies.

“In the private sector, that has been called ‘the death penalty,’” Reish concluded. Given the number of variables in that aspect of the rule, and the fact that not every country has “fair” justice and prosecutorial systems, the DOL could revise it.