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REGULATION/LEGISLATION

Trump calls for Dodd-Frank review, fiduciary rule delay or replacement

President Donald Trump speaks at a meeting Friday at the White House, as Blackstone Group CEO Stephen Schwarzman listens.

President Donald Trump continued his push to trim federal regulations Friday, signing an executive order that federal regulators revisit the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act to reduce its burden on the regulated financial community, and a separate executive memorandum directing the secretary of labor to consider delaying or replacing the fiduciary rule that is scheduled to go into effect in April.

Mr. Trump signed the actions after meeting with his Strategic and Policy Forum, a group of business leaders advising the White House on how policy impacts economic growth. Its members include Blackstone Group Chairman and CEO Stephen Schwarzman, who serves as chairman of the forum, and BlackRock (BLK) Chairman and CEO Laurence D. Fink.

In the Department of Labor memo, Mr. Trump directed the secretary of labor to examine the rule “to determine whether it may adversely affect the ability of Americans to gain access to retirement information and financial advice.” The memo also calls for a new economic and legal analysis of the rule's “likely impact.”

If that review finds that the rule will have a negative impact or is “inconsistent with administrative policy,” Mr. Trump ordered the DOL to publish a proposed rule rescinding or revising it.

The Labor Department should postpone the fiduciary rule beyond its April effective date while that review is underway and should consider further delay, said Mr. Trump, who noted ongoing court challenges as another reason for delay. The goal, he said in the memo, was to “empower Americans to make their own financial decisions.”

Acting Secretary of Labor Ed Hugler said in a statement that the DOL “will now consider its legal options to delay the applicability of the date as we comply with the President's memorandum.”

The fiduciary rule delay announcement was expected by many, “but you had to prepare in case there wasn't one,” said Robyn Credico, head of defined contribution consulting at Willis Towers Watson. Ms. Credico said in an interview that for plan sponsors, “nothing changes, other than continued uncertainty about whether they will have to do something at some point.”

John Anderson, managing director at SEI Investments (SEIC), who has been helping financial advisers navigate the rule, said “the industry would be wise to continue down the path of full fiduciary business implementation. Even with the DOL rule's delay, fiduciaries should strive to put clients' interests first.”

The combined actions could shift the fiduciary issue to the Securities and Exchange Commission, which so far has deferred to the DOL on any rule-making. “If the DOL fiduciary rule goes away, it seems likely that the SEC would revisit the issue,” said Norm Champ, a former SEC director of investment management who is a partner at law firm Kirkland & Ellis.

Investment Company Institute President and CEO Paul Schott Stevens said the delay of the fiduciary rule would allow time to “pursue a harmonized standard” for the retirement marketplace that coordinates with the SEC to best protect investors' interests.

Business and financial services groups welcomed the news, while market watchdogs predicted that the regulatory rollback could lead to another financial crisis.

“The president's order will allow time for policymakers to get it right,” said Financial Services Roundtable CEO Tim Pawlenty, who argued that financial professionals should act in their clients' best interest but “without miles of bureaucratic red tape.”

But the Financial Planning Coalition called the fiduciary rule action a “green light to maintain the status quo of conflicted financial advice,” and predicted “either a complete gutting … or outright demise.”

On the presidential order to revisit Dodd-Frank, Mr. Champ said, “so much of Dodd-Frank was not related to the crisis that there is a lot of room to review it.”

Sean Tuffy, senior vice president and head of regulatory intelligence at Brown Brothers Harriman, said the actions “don't really change things too much.” Mr. Tuffy noted that revising Dodd-Frank will take time, but likely targets for change include the Financial Stability Oversight Council and the Volcker rule limiting banks' proprietary trading. Any material change to Dodd-Frank is going to require buy-in from congressional Democrats,” and sensitivity to voters' perception of a Wall Street giveaway. “Given these restraints, a bonfire of Dodd-Frank seems very unlikely and instead you will see components amended,” Mr. Tuffy said.

Dennis Kelleher, president and CEO of Better Markets, a non-profit advocacy group for financial markets, said in a statement that “deregulating Wall Street is as bad an idea today as it was in the years before the 2008 crash,” and Mr. Kelleher predicted that Mr. Trump's favoring of Wall Street “is going to cause another devastating financial crash.”

U.S. Chamber of Commerce President and CEO Thomas J. Donohue called Friday's actions “the first step toward mending the dysfunctional regulation of the past.”

On Monday, Mr. Trump signed an executive order that requires federal agencies to cut two existing regulations for any new regulation introduced. The order does not directly apply to independent agencies like the SEC.