Securities specialists at a prominent law firm are predicting that the U.S. Department of Labor will soon unveil a more expansive fiduciary rule for advisors.

Senior attorneys at Faegre Drinker expect the DOL will move forward with a fiduciary rule that would clarify that even advisors who engage in one-time transactions involving the rollover of retirement and IRA assets will be considered fiduciaries.

Fred Reish, a partner at Faegre Drinker, who spoke at the firm’s “Inside the Beltway” webinar on Thursday, said he expects the agency could release a proposal within three to four months.

This “new” proposal would come on the heels of a Trump-era fiduciary rule which went into effect, in part, a year ago, but wasn’t enforced by the DOL until earlier this month. The new proposal would ostensibly replace the rule firms are working to comply with now.

“It’s hard to imagine I’m talking about an old DOL rule that only went into effect last year. But what about the new fiduciary rule that is on the DOL’s regulatory agenda and is the development of a new regulation to define fiduciary advice?” asked Reish, who heads a team former DOL, Securities and Exchange Commission and Financial Industry Regulatory Authority (Finra) attorneys at Faegre Drinker.

“The prediction is it would define fiduciary advice as including one-time advice. In other words, take away the ongoing recommendation requirement. ... So if you gave one time advice or establish a relationship of trust and confidence with the investor than that would constitute fiduciary advice,” he said.

The DOL did not respond to a request for comment.

The current DOL rule has two main parts: a new prohibited transaction exemption allowing advisors to accept conflicted compensations, such as commissions ad 12b-1 fees on rollovers, as long as they act in the best interest of their clients and meet other requirements. The DOL also reinstated a "five-part test" from 1975 to determine what constitutes investment advice.

The new test, however, includes a caveat limiting fiduciary advice to the kind made “on a regular basis to the plan.” That gave commission-based advisors who aren’t providing ongoing advice a carve out.

But the carve out was threatened when the DOL said in follow-up question guidance that first-time advice would qualify as fiduciary advice if the financial professional and investor later establish an ongoing advice relationship or intend to do so.

The DOL rule and guidance has led to two lawsuits, both filed in the first week of February, which seek to overturn the existing regulation.

“Basically they both say the DOL is trying to regulate without writing a regulation by citing sub-regulatory guidance. One lawsuit filed in Texas literally says the DOL is trying to pour old wine into a new bottle, trying to do an end-run around on the Fifth Circuit Court of Appeals, which vacated a prior Obama-era rule,” Reish said.

“What do I think about all the litigation combined? The truth is it’s almost impossible to predict litigation. And regardless of which way this is decided at the trial court level, I think this will go all the way to appeal. By the time it [is decided], we may already have the new rule ... and that rule could moot much of the litigation because the old rule’s gone away,” Reish said.

The American Securities Association (ASA), which represents wealth management and capital markets interests of regional financial services firms, filed its lawsuit in the Middle District of Florida. The group’s suit claims that the DOL used agency guidance in the form of a "Frequenty Asked Questions (FAQ)" section to impose new obligations on retirement accounts that did not previously exist.

They also say the DOL is violating the Administrative Procedure Act of 1946 (APA), which governs the process that federal agencies develop and issue regulations, by not providing a rulemaking period to solicit public input. 

The Federation of Americans for Consumer Choice, which represents insurance agents and agencies, filed a lawsuit in a Dallas federal court challenging the DOL rule a day earlier. In the suit, the FACC argues that the DOL lacks the authority to broaden the definition of financial advisors who must act as fiduciaries for retirement savers.