Over the last month or so, the biggest risk for advisors in the regulatory space has been the reemergence of the fiduciary rule. The DOL is set to release a new version of the rule as soon as by the end of this year. While this caused anxiety in itself, the most worrying aspect has been that Eugene Scalia, new head of the DOL, appeared likely to have to recuse himself from involvement in the new rule-making process because of his involvement as a private lawyer with the first version of the rule. However, government ethics lawyers have just announced that after consideration of the situation, Scalia will NOT need to recuse himself and can take part in making a new rule.
FINSUM: This is a big win for those who do not want a new DOL rule, or at least not a new one that looks anything like the first version. Consumer advocacy groups are very upset about the decision.
For the last couple of months it has been pretty easy to assume that the new version of the DOL’s fiduciary rule would not have nearly as heavy a hand as the first iteration. Most have thought it would likely sing to the same tune as the SEC’s best interest rule. One of the integral reasons for this view is that the DOL is now under the leadership of Eugene Scalia, son of Antonin Scalia, the former of which is one of the top securities lawyers in the country and long a fierce critic of the fiduciary rule. However, a major new development this week—Scalia says he may have to recuse himself from the whole fiduciary rule process because of federal ethics rules. Scalia was part of the lawsuit that defeated the rule last year, which is the reason for the recusal.
FINSUM: It now seems very likely that Scalia won’t be leading this process, which means it is commensurately more likely the DOL rule 2.0 could be much tougher than expected.