Fred Reish Comments on Expected Final DOL Fiduciary Rule in Financial Advisor Magazine

In “Final DOL Rule Draws Near As OMB Completes Review,” Financial Advisor Magazine turned to benefits and executive compensation partner Fred Reish about what to expect now that the Office of Management and Budget (OMB) finished its review of the Department of Labor’s fiduciary rule.

Reish said, “With the OMB completing its review, it is likely that the final fiduciary regulation and the related exemptions will be public by the end of this month and published in the Federal Register within days after that.”

“With a Democratic Senate and president, there is virtually no chance that the rules would be overturned,” Reish explained. “However, if, after the November elections, the Republicans gain control of both Houses of Congress and the White House, the Congressional Review Act could be used to invalidate the rules. My suspicion is that someone is watching the clock.”

Reish noted that once the final regulation and exemptions are published in the Federal Register, they will become effective 60 days later. The business activity most likely impacted by the amended rules will be annuity sales by independent insurance agents and the insurance companies that sell through those agents, he continued. Also, he stated that a second group will likely be smaller broker-dealers and investment advisory firms that did not get into full compliance with the current version of Prohibited Transaction Exemption 2020-02.

According to Reish, “There will certainly be lawsuits filed. Most likely, the trade groups for insurance companies and independent agents will lead those litigation efforts, although I also expect other groups with financial service company members to be in the fight as well.”

The plaintiffs will likely file with a U.S. District Court in the Fifth Circuit covering Texas, Louisiana and Mississippi “because they will be forum shopping for a conservative judge and the ability to appeal to the most conservative appellate court — the Fifth Circuit Court of Appeals. It was the Fifth Circuit that struck down the Obama-era fiduciary regulation,” he concluded.