Securities attorneys say they check the U.S. Department of Labor regulation portal regularly to see if the agency has proposed its new, improved fiduciary rule, but there is still no sign of the long-awaited document.

Until a new DOL fiduciary rule is finalized, broker-dealers and registered representatives are required to use the large DOL-required BIC—or best interest contract exemption—in order to work with retirement plans and participants on a commission basis. Designed as a way to allow plans and participants to work with middle-class plan participants and smaller plans, the BIC exemption allows otherwise prohibited “conflicted compensation” to be paid on transactions (including insurance or annuity sales), if advisors use an extensive contract that spells out their duty of loyalty to clients.

“We need a replacement for the BIC exemption,” said Bradford Campbell, a partner in law firm Faegre Biddle’s employee benefits and executive compensation group, during the firm’s recent "Inside the Beltway" audiocast.

“We think one of the DOL’s goals is to make compliance with their rule close enough to the Securities and Exchange Commission’s Regulation Best Interest so that you have a more simplified process,” added Campbell, who told the 1,000-plus participants on the conference call that he had just checked the DOL website to see if the agency had sent the proposal to the White House for approval. It hadn’t, he said.

With each passing day, “the clock is ticking” on whether a revised Department of Labor fiduciary rule can be passed and implemented before the November 2020 elections, Campbell said.

Ever since the SEC passed its Regulation Best Interest rule last year, many have wondered when the DOL would revise its own fiduciary rule, which was passed by the Obama administration and struck down in the Fifth Circuit U.S. Court of Appeals in March 2018.

Many industry pundits were expecting the DOL proposal by the end of last year. The issue has become even more pressing since Congress passed the SECURE Act to encourage smaller businesses to create retirement plans and green-lighted the inclusion of annuities in plans for the first time.

Campbell said the initial delay was because DOL ethics officials were determining whether Eugene Scalia, Trump’s new labor secretary, had conflicts of interest that would prohibit him from participating in the creation of the new rule (Scalia served as counsel for plaintiffs who brought the successful class action suit against the last DOL fiduciary rule). The department eventually ruled that Scalia could work on the revised rule.

Campbell said the Trump administration needed to move quickly so the rule could be implemented before the November presidential election. Even if the rule were sent to the White House tomorrow, Campbell said, it would face a multi-month process of public comment periods and revisions before implementation. And the longer the Trump administration waits for the rule, he said, the greater the risk of a new Democratic administration undoing those efforts.

“The closer a regulation is implemented to the end of a term, the easier it is for that regulation to be changed by the incoming administration. It’s in their interest to move this expeditiously,” Campbell said. “It’s possible they could do all that in 2020 but it’d be an aggressive schedule for an agency to keep.”

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