The Biden administration has put forward a new proposal around the regulation of retirement plan investment advice, which could be subject to legal challenges. Although the proposal aims to enforce stricter fiduciary standards on more financial professionals, critics have argued the administration has not adequately distinguished between advice and sales.
The new proposal is part of the U.S Labor Department proposals which President Joe Biden announced on Oct. 31. The regulatory package encompasses diverse investment advisory services, which some argue is an oversimplification. One of the main criticisms is that the proposal does not make a clear differentiation between advice and sales, which is a core concern raised by critics.
The same issue led to the undermining and vacating of a similar rule during the Obama-era. The U.S Court of Appeals for the Fifth Circuit overturned the previous rule because of the same oversimplification, resulting in the vacating of the prior rule. Given this precedent, the Biden administration’s latest proposal is potentially subject to legal challenges.
The volatility of the legal environment around fiduciary rulemaking is a cause of concern for many legal professionals and corporate entities, who closely monitor these developments. The implications of these regulatory changes can have wide-ranging impacts on both the finance and legal sectors.
This information was reported by Bloomberg Law.
Read the full regulatory proposal, ‘88 Fed. Reg. 75890–76045‘ and the official announcement from President Joe Biden.
Learn more about the legal challenges to the Obama-era fiduciary rules at the US Court of Appeals for the Fifth Circuit.