Trump Administration Hits Hurdle In Fiduciary Fight

An updated landing page tracking the Office of Management and Budget’s (OMB) review of the Department of Labor (DOL) fiduciary rule, championed by former President Barack Obama but now being attacked by current President Donald Trump, shows the OMB has officially labeled the effort to halt the fiduciary regulations as “economically significant.”

To be clear, this new OMB determination is applied to a new rule that will apparently soon be submitted by the Trump administration for public comment—a rule that would somehow revoke entirely or scale back the fiduciary rule that was adopted under the Obama White House. The contents of the new rule are as yet unknown but could soon emerge now that OMB has concluded its review. 

While the determination ostensibly makes it more burdensome for the Trump administration to unravel the initial fiduciary rulemaking, there is some disagreement as to what this will actually mean in practice. Under current law, OMB and its subdivisions are responsible for determining which agency regulatory actions are “significant” and, in turn, subject to interagency review. “Significant” regulatory actions are defined in an executive order as those that: “Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities; create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or raise novel legal or policy issues arising out of legal mandates, the President’s priorities, or the principles set forth in this executive order.”

To be “economically significant” in turn requires an even higher hurdle; these regulatory actions are a subset of those designated by OMB as simply “significant.” A regulatory action is determined to be “economically significant” if OMB determines that it is “likely to have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities.”

Under current law, for all “economically significant” regulations, any impactful executive order must also direct the relevant agencies to “provide (among other things) a more detailed assessment of the likely benefits and costs of the regulatory action, including a quantification of those effects, as well as a similar analysis of potentially effective and reasonably feasible alternatives.”

Given all this, which is clearly spelled out on OMB’s website, it seems that the DOL fiduciary rule will in fact require a more extensive review than the Trump White House was apparently hoping for. Some media outlets have reported that changes proposed for any “economically significant” regulation tend to get, at the very least, a 60-day comment period for the public and impacted industry to review and make their own statements. 

If this turns out to be the case for the DOL rulemaking, with its first compliance deadlines rapidly approaching in early April 2017, it would seemingly put advisers in the difficult position of having to plan to comply with a set of conflict of interest standards that may very well be thrown out entirely in another couple months or perhaps late this year.