Before he took office, 8of9 made predictions about the most likely deregulation actions President Trump would take, and it hasn’t taken him long to begin to follow the script.  Within his first weeks in office, Trump has requested for the Department of Labor (“DoL”) to review Obama’s Fiduciary Rule, which is set to go into effect on April 10, 2017.  This request has caused the DoL to announce that it is “consider(ing) its legal options to delay the applicability date” as it complies with Trump’s executive order.

8of9’s earlier regulatory change chart, reflecting the DoL Fiduciary Rule change.

The Road Ahead

Analyzing what the administration has directly said about the regulation, there is a clear intent to not just delay implementation of the rule, but to never implement it.   Trump’s press secretary Sean Spicer, commenting after Trump signed the executive order, said, “The rule is a solution in search of a problem.  There are better ways to protect investors, and the Trump administration is taking action to do so.”  However, there are similarities between the fiduciary rule and Obamacare that may make total repeal of the rule difficult for Trump.  While deregulation in the abstract may have public support, reversing a rule aimed at protecting Americans’ retirement accounts is a tough sell.

Adding to the administration’s difficulty is a ruling out of the U.S. District Court for the Northern District of Texas on Wednesday, February 8.  The decision was in response to industry groups’ attempts to stop the rule before enforcement.  In her 81 page decision, Chief Judge Barbara Lynn found the rule to be well-reasoned, in the best interest of consumers, and critically, that the rule did not overstep the Department of Labor’s legal bounds.

“The court finds the DOL adequately weighed the monetary and non-monetary costs on the industry of complying with the rules, against the benefits to consumers,” Lynn wrote.

“In doing so, the DOL conducted a reasonable cost-benefit analysis.”

While the decision itself cannot change the administration’s delay of implementation, it does uphold the legality of the rule, and outlines the reasons for which the rule was written.

The bottom line: 8of9 predicted that this was the most likely first fight for deregulation the Trump administration would wage, and we were right.  How this plays out remains to be seen, and the financial services industry will have to wait with bated breath to see if the rule will ever be enacted.