38 INVESTMENT ADVISOR JUNE 2020 | ThinkAdvisor.comsecretary of Labor for the EmployeeBenefits Security Administration, lefthis post at the end of May.
As head of EBSA, Rutledge wascharged with spearheading Labor’s newfiduciary rule to align with Reg BI. Atpress time in early May, that rule had yetto land at the Office of Management andBudget for review.
Labor “is focusing on guidance relat-
ed to coronavirus issues,” including the
Coronavirus Aid, Relief and Economic
Security (CARES) Act,
said ERISA attorney Fred
Reish of Faegre Drinker
Biddle & Reath. “I don’t
think the fiduciary reg is a
While it “would be
convenient” for Labor to
release its rule, “it’s not
necessary” as it relates to
compliance with Reg BI,
Brad Campbell, formerhead of EBSA who’s nowa partner at Faegre Drinker Biddle &Reath in Washington, added that whileRutledge’s departure won’t result “inany additional delay to current outstanding projects at EBSA, given thestrength of his deputy, Jeanne Wilson,and the importance of the agency’s mission to current events,” Labor’s fiduciary rule reboot has been pushed to theback burner.
“Reproposing the fiduciary rule is notat the top of the Department’s agenda,”Campbell said. “How far down it hasslipped only time and publication ofthe spring regulatory agenda will tell.”That reg agenda had yet to be releasedby press time.
Reish added that even if Labor’sfiduciary rule was sent to the OMBnow, “it probably couldn’t be final untilafter the next president is sworn in,”and could be reversed if the new president is a democrat.
Rep. Phil Roe, R-Tenn., a member
of the House Education and Labor
Committee, said during a late April
Zoom webcast held by the American
Council for Capital Formation that
Labor should hold off releasing a
“I would wait,” Roe said. “Certainlythe less rulings that can be renderedduring a pandemic when people arejust trying to keep their head abovewater — to delay any of those — wouldbe a good idea.”
IOWA ENTERS FIDUCIARY RULE FRAYThe Iowa Insurance Division adoptedin mid-May its best-interest standardrequiring financial professionals to actin the best interest of clients when selling annuities, and will re-propose itsrule for securities later this summer.
The plan, released by the IowaInsurance Division, is based on themodel regulation approved by theNational Association of InsuranceCommissioners earlier this year that isharmonized with Reg BI and requiresannuity agents and broker-dealers andtheir reps to act in the best interest oftheir clients.
The Iowa Insurance Division is a member of the NAIC and North AmericanSecurities Administrators Association.
Iowa Insurance Commissioner Doug
Ommen, who is also the state’s securi-
ties regulator, said in a statement that
“Iowans expect their financial profes-
sional to act in the consumer’s best inter-
est when recommending an annuity. Iowa
not only expects it, but we will require it.”
Ommen said he hopes to also work
with other U.S. insurance regulators “to
require the same of any Iowa insurer
writing annuity business in those states.”
During the comment period, Ommen
said that several comments request-
ed that due to COVID- 19, the division
delay the proposed best interest stan-
dard in our securities regulations. “We
have decided that is the appropriate
course. I anticipate pro-
posing best interest secu-
rities standards again
later this summer.”
Jason Berkowitz, chief
legal officer for the
Institute, said in a state-
ment that he applauded
the Iowa Insurance
Division “for moving
expeditiously to finalize
their proposal to adopt the
NAIC’s enhanced annuity
sales practices model regulation, and for
recognizing the need to step back and
re-evaluate the proposed best interest
standard for broker-dealers.”
Barbara Roper, director of investor
protection for the Consumer Federation
of America, told me, however, that CFA
has “strongly opposed” the annuity rule
because “under the NAIC model, an
annuity seller meets their so-called ‘best
interest’ obligations by recommending
a product that meets the customer’s
needs, in other words by recommending
a generally suitable product. It includes
provisions to address conflicts of inter-
est, but exempts the biggest conflict,
cash and non-cash compensation, from
the definition of material conflicts.”
Massachusetts’ fiduciary rule tookeffect on March 6, and enforcement willstart Sept. 1.
Washington Bureau Chief Melanie Waddell canbe reached at firstname.lastname@example.org.
‘Certainly the less rulings that can
be rendered during a pandemic
when people are just trying to
keep their head above water [such
as the DOL’s fiduciary rule] …
would be a good idea.’
—Rep. Phil Roe, R-Tenn.