The United States Department of Labor (the “DOL”) submitted to the Office of Management and Budget (the “OMB”) a revised version of the “conflict of interest” rule expanding the definition of the term “fiduciary” on Monday, February 23, 2015.  Generally, the OMB has up to 90 days to review rules, although review times can vary considerably.  Subsequent to the OMB review, the proposed rule is published and interested stakeholders are permitted to make comment on the proposed rule.

ERISA imposes certain obligations on persons who act as plan fiduciaries, including the imposition of liability for losses attributable to a failure to meet applicable fiduciary standards.  In that regard, under this standard fiduciary obligations may be imposed on investment advisors that provide investment advice to a plan in return for a fee or other compensation, whether payable directly or indirectly.  The DOL has become concerned over the last several years that the breadth of the current rule is both outdated and inadequate, and that it fails to reach certain investment professionals who provide investment services to plans and individuals with respect to retirement assets (including individual retirement accounts).

The DOL first attempted to revise this fiduciary standard back in 2010 with the publication of a proposal that many observers concluded would have expanded the breadth of the rule with respect to investment professionals.  That proposal ran into considerable headwind, and drew wide-ranging criticism both from the business community (including Wall Street) and from Congress.  Eventually that proposal was withdrawn, perhaps influenced by political considerations as the 2012 presidential campaign drew near.

Like in 2010, this new proposal presumably will aim at expanding the application of fiduciary burdens on persons that provide investment advice.  While the actual language of the new proposal is not scheduled to become public until it is published following OMB’s review, it seems likely to inspire the same wave of opposition that arose in 2010 (even though the political calculations might be different this time around).  As an indication of how political considerations at the White House may have evolved, President Obama took the somewhat unusual step of announcing the filing of the re-proposed rule at the OMB on February 23.  That speech followed closely behind a conference call on February 22 covering the benefits of the re-proposed rule that featured DOL Secretary Tom Perez.  To complete this “full court press,” the White House released both a fact sheet touting the proposed rule and a report from the Council of Economic Advisors that reviews the negative implications of conflicted investment advice.  Many observers thought the White House walked away from these proposals a few years ago in the face of considerable business and political pressure.  Such a tactical retreat seems less likely this time around, at least at the present time, and thus this initiative bears watching.