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Updated 5 minutes ago
WASHINGTON — Conflicting messages from the White House have left brokerage firms and lobbyists unsure whether a controversial rule governing retirement advice will ever be put in place, but they are taking no chances and complying anyway.
President Trump's memorandum on Friday ordered the Labor Department to review the so-called “fiduciary” rule, which requires brokers to put their clients' interests first when advising them about 401(k) plans or individual retirement accounts.
But that call for a review was significantly weaker than an earlier draft, seen by Reuters, that requested a 180-day delay in the scheduled April 10 effective date of the rule which is already on the books.
Trump's memo did not go as far as White House early guidance to reporters that the memo would ask the department to “defer implementation” of the rule.
It is not clear just how quickly or easily the Labor Department can delay implementation of the rule.
And while a delay is expected, it still is not clear to Wall Streeters who have already started changing their business models whether they can count on a deferral or reversal of the regulation.
“There's confusion because it injected a whole lot more noise into the system with very little specificity about what is to come,” said Michael Spellacy, the head of PWC's wealth management consultancy, who said he spent most of his weekend on the phone with the heads of 35 brokerages discussing the memo and its implications.
Legal experts say the Labor Department likely will have to undertake a formal rulemaking process in order to delay the rule's implementation and the lack of a permanent Labor secretary may cause further delays.
Trump's choice to be Labor secretary, Andrew Puzder, has seen his confirmation indefinitely postponed in the Senate amidst issues with his ethics paperwork.
One other possible problem that could impact the rule's implementation is a pending legal challenge in a federal court in Texas. Last week, the judge said she plans to rule no later than Feb. 10.
The fiduciary rule is separate from the banking rules that were put in place after the 2008 financial crisis. Trump has also ordered a review of the 2010 Dodd-Frank reform.
In the meantime, lawyers are advising their financial services clients to continue preparing for the upcoming deadline.
“What is clear from the memo is that we don't have certainty yet,” said Michael Kreps, an attorney with the Groom Law Group.
The White House did not explain why it scaled back its memo, but legal experts say it was most likely changed because the prior version may have violated the Administrative Procedures Act, a federal law that governs the rulemaking process.
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