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Karl A. Racine
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Attorney General Racine and Counterparts Urge Department of Labor Not to Delay Fiduciary Rule in Response to President

Thursday, April 20, 2017
Rule Would Require Financial Advisors to Put Clients’ Best Interests Ahead of Profits

Contact:
Rob Marus, Communications Director: (202) 724-5646; robert.marus@dc.gov
Andrew Phifer, Public Affairs Specialist: (202) 741-7652; andrew.phifer@dc.gov


WASHINGTON, D. C. – Attorney General Karl A. Racine has joined Iowa Attorney General Tom Miller and a group of six other state attorneys general in a letter urging the U.S. Department of Labor to lift its delay in implementing a rule designed to protect consumers. The rule would require financial advisors to put their clients’ best interests ahead of their own profit -- but President Trump has expressed concerns about the rule and asked the Labor Department to review it.

The investment advice fiduciary rule was set to take effect April 10, but the Department of Labor delayed it by 60 days to June 9. On February 3, President Trump ordered the agency to review the fiduciary rule “to determine whether it may adversely affect the ability of Americans to gain access to retirement information and financial advice.”

“To the contrary, postponement of its application is costing investors tens of millions of dollars each day as advisors continue to give conflicted advice and the rule should be implemented without further delay,” the attorneys general wrote, in a letter to Acting Secretary of Labor Edward Hugley. “This rule is long overdue and would provide substantial protections to consumers seeking retirement investment advice and create only necessary changes to the retirement investment market.”

The rule would expand the definition, under law, of “fiduciary” and hold all retirement investment advisors to the standard of a fiduciary. In addition to putting clients’ interests before advisors’ profits, the rule also would require advisors to disclose conflicts of interest, and would remove advisors’ limited liability for harms resulting from their advice.

“Many middle-class Americans -- including thousands of District residents -- rely on the services of financial advisers to help them as they invest for retirement,” Attorney General Racine said. “This rule would protect consumers and prioritize their well-being ahead of corporate profits, and we urge the Department of Labor to cease delaying implementation of the rule.”

The Labor Department issued the fiduciary rule on April 6 of last year to protect investors and address problems in the retirement investment advice market. Previously, an agency analysis found that conflicting advice issues are widespread and cause serious harm to investment plan and IRA investors. Additionally, the analysis found that investment agencies often prioritize compensation ahead of clients’ interests.

“The rule addresses conflicts that lead to widespread abuse of vulnerable investors and in turn dramatically improves the quality of financial investment advice provided,” the attorneys general wrote. “Rather than self-regulating in anticipation of change, the industry has taken full advantage of their non-fiduciary status to the detriment of consumer investors.”

In addition to the District and Iowa, the letter was signed by attorneys general from Hawaii, Illinois, North Carolina, Oregon, Pennsylvania, and Washington state. A copy is attached.