A controversial Obama-era rule for retirement advisors, delayed by a review ordered by President Trump because of strong Republican and financial industry opposition, will partially take effect next month, Labor Secretary Alexander Acosta said.
But Acosta indicated he has problems with the rule and that there still could be changes or a repeal before all of its provisions kick in next year.
The regulation, known as the fiduciary rule, requires investment brokers who handle retirement funds to put their clients’ interests ahead their own compensation, company profits or other factors.
The Obama administration said those conflicts of interest cost consumers $17 billion a year as they are steered toward IRAs and other retirement investments with higher fees or lower returns.
But opponents, including key players in the financial industry and most Republicans, complained that the rule would increase the cost of investments by forcing asset management firms to spend money on implementation and make it more difficult for average Americans to get retirement advice.
The Republican-controlled Congress voted last year to overturn the rule, but Obama vetoed the measure.
Trump ordered a review of the rule on Feb. 3, with White House Press Secretary Sean Spicer calling it a “regulatory overreach” by the Labor Department.
Parts of the rule were supposed to take effect on April 10, but the Labor Department delayed that for 60 days to conduct the review.
Noting that some opponents of the rule have called for a continued delay, Acosta said his review of the Administrative Procedure Act has “found no principled legal basis” to do so.
“Respect for the rule of law leads us to the conclusion that this date cannot be postponed,” Acosta wrote in an opinion article for the Wall Street Journal posted Monday night.
“The Labor Department will roll back regulations that harm American workers and families,” he said. “We will do so while respecting the principles and institutions that make America strong.”
Some provisions will go into effect on June 9, including the requirement that financial advisors act in the best interest of their clients. But a key component of the regulation, that firms accepting commissions put the provisions into customer contracts, will not take effect until Jan. 1, 2018.
In formal guidance, the Labor Department said it would “not pursue claims” against advisors who work “diligently and in good faith” to comply with the rule until it fully takes effect on Jan. 1.
Acosta, who took office on April 28, indicated that he has problems with the rule and that a full implementation might not come or the regulations could be watered down. He is seeking additional public input.
The rule “as written may not align with President Trump’s deregulatory goals,” Acosta said.
“Certainly, it is important to ensure that savers and retirees receive prudent investment advice, but doing so in a way that limits choice and benefits lawyers is not what this administration envisions,” he wrote.
Acosta, a former Justice Department official, was Trump’s second nominee for Labor secretary. He was chosen after Southern California fast-food executive Andrew Puzder withdrew from consideration amid controversies that threatened his Senate confirmation.