After Donald Trump’s election victory, many are wondering what to expect with respect to the Department of Labor’s recently adopted fiduciary rule governing investment advice related to retirement plan assets. While President-Elect Trump has not yet specifically revealed any plans to either rescind or retain the fiduciary rule, there is evidence to suggest that he very well might want to scuttle it – when he might get around to doing so or how long it would take him to accomplish, however, may be critical elements to consider. In addition, because enforcement of the rule primarily resides with the plaintiff’s bar, and not the Department of Labor or other governmental agencies, relying on deliberately lackadaisical government enforcement is not an option. Our advice – be ready for full implementation of the rule.
Mr. Trump has made it no secret that he fully intends, as President, to take aim at many existing regulations. In a recent town-hall meeting in New Hampshire, Mr. Trump remarked that as many as 70% of federal regulations would be on the chopping block if he were to be elected. Furthermore, the retention by the Republican Party of the majorities in both the Senate (albeit not filibuster proof) and the House of Representatives will certainly serve to afford Mr. Trump more opportunity to keep his promise to bring significant change to the existing regulatory landscape. Anthony Scaramucci, a small-business advisor to Mr. Trump and founder and managing partner of SkyBridge Capital, has confirmed that a Trump administration would seek to scale back regulations in every area, and recently commented that “[w]e need regulation, but immediately every agency will be asked to rate the importance of their regulations and we will push to remove 10% of the least important.” Mr. Scaramucci has also been more specific in his comments with respect to which regulations might be caught in Mr. Trump’s crosshairs. As reported by InvestmentNews, at the October 2016 Securities Enforcement Forum in Washington, D.C., Mr. Scaramucci explicitly indicated that a Trump administration would in fact repeal the fiduciary regulation and voiced his belief that the regulation “could be the dumbest decision to come out of the U.S. government in the last 50 to 60 years.” Despite these comments from a close advisor, the Trump campaign did not respond to requests for comment on the fiduciary rule or concerning Mr. Scaramucci’s statements regarding the rule.
This silence from Mr. Trump and his official campaign on this specific issue has fed speculation that Mr. Trump may not view the targeting of the DOL fiduciary regulation as a priority when he has not been shy about naming those regulations that he does intend to squelch. In addition, the ability of a President to undo existing regulations (certainly those that have already been published in the Federal Register, as the fiduciary rule has) is not as simple as waving a magic wand and making it disappear. A former top official at the White House’s Office of Management and Budget, Susan Dudley, said “you can’t just repeal regulations with a stroke of a pen like you can an executive order.” Since the fiduciary rule was finalized more than 60 legislative days before Mr. Trump’s inauguration, use of an expedited legislative procedure under the Congressional Review Act to undo existing regulations is no longer an option. Furthermore, while the effective date of a regulation that has not yet become effective can typically be suspended, and the suspension period could be utilized by the administration to go through the laborious procedures mandated by the Administrative Procedures Act in order to rescind a suspended regulation (similar to the procedures necessary to establish a new regulation), it is questionable whether that tactic would work in the case of the DOL fiduciary rule which is technically already in effect. Since the DOL fiduciary rule became effective, as of June 6, 2016, only its initial applicability date of April 10, 2017 still looms, and thus, suspension may also no longer be an option. Finally, Mr. Trump could also go to Congress and ask that they repeal the fiduciary rule. Without a filibuster-proof majority in the Senate, however, that may be a long shot, and in any event would be a time-consuming effort. Despite its possible desire to rescind the fiduciary rule prior to its applicability date, circumstances may dictate that the administration undo the rule after it has become applicable – a process that will not be quick at all.
It is difficult to imagine that there will be sufficient time to rescind the fiduciary rule before it becomes generally applicable on April 10, 2017, less than just 90 days after Mr. Trump is inaugurated. Again, the absence of any direct comments from Mr. Trump indicating a desire to repeal this regulation seems to also indicate, at the very least, that doing so is not a priority for him and there may be no rush to address it before the rule becomes applicable, especially when there is a laundry list of regulations that Mr. Trump has identified as targets for his first months in office. Even if quashing the rule were a top priority for the Trump administration, it is not clear that the administration would be able to simply suspend the applicability date, and there would be a relatively lengthy time period needed to complete revocation. There should be no perceived relief that the Trump administration will simply choose not to enforce the fiduciary rule since the fiduciary rule’s true enforcement tool is not governmental, but private legal action. Accordingly, we urge all who may fall under the fiduciary rule’s scope not to rely on the possible undoing of the fiduciary rule, which would likely only take place, if at all, in the distant future, and to continue to prepare for full compliance.