The Consumer Federation of America is calling out the Department of Labor on its proposal to delay full implementation of its fiduciary rule another 18 months, saying the delay is a thinly veiled attempt to kill the investor protection rule using a backdoor mechanism not found in law.
Executives of the watchdog group are keeping all avenues of redress against the DOL open—including a possible lawsuit.
“If they finalize the rule as they've proposed it, then there is a strong likelihood that we would sue,” said Micah Hauptman, the CFA’s financial services counsel, in an interview with Financial Advisor. “We're not ruling anything out, and all options are on the table, but we need to see the final rule before we make a final decision about whether we'd sue.”
The CFA is responding to the DOL’s filing of a proposed rule with the Office of Management and Budget yesterday to delay full implementation of the rule from January 1, 2018, to July 1, 2019.
The fiduciary rule is designed to ensure that retirees rolling over their 401(k)s and other defined contribution plans into IRA brokerage accounts are afforded a similar level of fiduciary duty from their brokers as they’ve had with retirement accounts, which have an explicit fiduciary duty to investors under ERISA.
“The big problem is that they're using a backdoor procedural mechanism to effectively revoke critical provisions in the rule,” Hauptman said. “They can't do that and they haven't justified why they're doing it.”
“Based on the proposal, they haven't justified why they're doing this. We think they're engaging in arbitrary and capricious action. We have to see the final rule to make our determination.”
The DOL did not immediately respond to a request for comment.
The CFA has been a vocal critic of a delay of the rule for months and has stressed to the DOL in two separate letters that the agency has not provided an adequate factual or legal basis for the delay, which the federation argues is inconsistent with all of the department’s previous analysis and findings for promulgating the rule in the first place.
“This is clearly not a proposed delay; it’s a proposed stay,” said Barbara Roper, the CFA’s director of investor protection. “Rather, the intent is to grant what is effectively a revocation of the applicability of the most consequential provisions of the rule by staying them, with the goal that implementation of these provisions never occurs.”