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The 2016 Election and the Fiduciary Regulation

Could the 2016 election affect the fiduciary regulation?

The short answer is, yes. While published reports have indicated that the two major party candidates might have a shared enthusiasm for state-run auto-IRA programs underway in several states, the Labor Department’s fiduciary regulation is another matter.

For months, opponents of the fiduciary regulation have held out hope that a Trump presidency would slow, stop and/or significantly alter the shape and impact of the fiduciary regulation. While candidate Trump hasn’t weighed in on the fiduciary regulation specifically, he has consistently spoken of his intention to reduce the reach of government regulations, and it seems reasonable to think that he’d see the fiduciary regulation in that light.

As for candidate Clinton, she has spoken out directly in favor of the fiduciary regulation. Earlier this year in a New York Times editorial titled “How I’d Rein in Wall Street,” she called the fiduciary rule a “common-sense effort to prevent conflicts of interest by financial managers.” While there might well be changes at the Labor Department, odds are that a Clinton administration would stay the course with the fiduciary regulation.

The election could have another, longer-term effect: its impact on the courts generally, and on the U.S. Supreme Court in particular. There are at present six legal challenges to the fiduciary regulation working their way through the courts. The first was ruled on last week (in favor of the Labor Department), while another (the District of Kansas) heard oral arguments on September 23. Still another – a consolidation of three separate lawsuits – is due for its hearing next week in another federal court (the 5th Circuit). The sixth, filed in the U.S. District Court for the District of Minnesota, is also pending.

A split in the federal courts would likely be taken up by the Supreme Court – although how soon, and whether the new president would have success getting a nominee confirmed by the Senate to replace the open seat created by Justice Antonin Scalia’s untimely death before then remains to be seen. On that front, the composition of the Senate – and that body’s willingness to provide “advice and consent” could be key. Who wins the White House – and the Senate – would matter in both the outcome and the timing of those decisions.

Even then, it’s anybody’s guess as to how the nation’s high court would view the fiduciary regulation – or whether by the time it did so, most organizations wouldn’t have already undertaken the structural and business model changes required to comply with its terms.

It’s doubtful that anyone – even NAPA Net readers – is heading to the polls with the fiduciary regulation top of mind.

But it’s worth remembering that while things like the fiduciary regulation aren’t on the ballot, they can be affected and influenced by the people who are.