Perspectives

DOL submits final fiduciary rule to the OMB for review

Rule will be released within 90 days

On January 28, 2016, the Department of Labor submitted its final “Conflicts of Interest” rule to the Office of Management and Budget.

The Office of Management and Budget review

The OMB is required to review “significant” regulatory actions before they become effective and has up to 90 days to complete the review, although there is no minimum period for review.[1] Following the OMB's review, the final rule will be published in the Federal Register with an effective date no sooner than 60 days following publication. While components of the rule could be effective within five months (three months for OMB review and two months after publication in the Federal Register), we expect the compliance requirements of the rule to be phased in over a longer period of time.

Although the OMB has the authority to extend the review process as well as the authority to return a regulatory action to an agency for further consideration, based on history, the prospect of this action remains unlikely. The last time the OMB returned a regulatory action to an agency for reconsideration was in 2011, despite having reviewed hundreds of proposed and final rules since that time. [2]

[1] Significant regulatory actions are defined as those that (1) have an annual effect on the economy of $100 million or more; (2) create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) materially alter the budgetary impact of entitlements, grants, user fees, or loan programs; or (4) raise novel legal or policy issues arising out of legal mandates or the president’s priorities. Executive Order 12866, Regulatory Planning and Review, 58 Fed. Reg. 51735 (Oct. 4, 1993), available at http://www.reginfo.gov/public/jsp/Utilities/EO_12866.pdf

[2] OMB, Office of Information and Regulatory Affairs (OIRA) Return Letters, available at http://www.reginfo.gov/public/do/eoReturnLetters​

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Timeline for the Office of Management and Budget review

Additional considerations

In addition to the OMB review, under the Small Business Regulatory Enforcement Fairness Act (also known as the Congressional Review Act), Congress may pass a “joint resolution of disapproval” within 60 legislative days of receiving the final rule (i.e., before the rule’s effective date). [1] If the president signs the resolution—or, if Congress overrides the president’s veto—the rule will not take effect. This avenue of stopping the rule also seems unlikely to prevail given that President Obama would likely veto the measure, and Congress may not have the requisite two-thirds majority to override a veto on this issue.[2]

Institutions that will be affected by the final rule should start planning immediately, if they have not done so already, rather than waiting for the final rule to be released. Among other things, institutions should identify what changes will likely be required, and what such changes may cost. They need to assess the implications of who is deemed a fiduciary, where conflicts exists, and how their overall business strategy and operations will likely need to be modified as a result of the rule.


[1] Pub.L.104-121, available at https://www.gpo.gov/fdsys/pkg/PLAW-104publ121/pdf/PLAW-104publ121.pdf

[2] Since the Congressional Review Act was enacted in 1996, 43 resolutions of disapproval have been introduced in either the House or the Senate, but only two of those regulations have passed either chamber of Congress. Further, only one rule has been disapproved by Congress under the law. See Congressional Review Act FAQs, available at http://www.gao.gov/legal/congressional-review-act-faq/about​​

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We continue to actively monitor events as they unfold and will issue an update as soon as the next major development occurs, including the release of the final rule text.​ Please visit our dedicated DOL page for the latest information.

Contacts

Susan Levey, Deloitte Risk and Financial Advisory director, Deloitte & Touche LLP

 

Scott Parker, principal, Deloitte Consulting LLP

 

Daniel Rosshirt, principal, Deloitte Consulting LLP

 

Sean Cunniff, specialist leader, Deloitte Consulting LLP

 

Josh Uhl, Deloitte Risk and Financial Advisory senior manager, Deloitte & Touche LLP

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