With the final month of 2009 fast approaching, 2010 is looking to be a big year in the fiduciary arena as regulators and legislators prepare to pass key regulations and legislation, and the high court delivers a key ruling and also considers whether to take up more fiduciary issues.
This week, the Department of Labor announced another delay in the effective date of the investment advice regulations that were originally published in January. The delay is in line with a previous announcement made by Phyllis Borzi, the Assistant Secretary of the Employee Benefits Security Administration, that the agency would pull the rules finalized in January and issue new rules. With a new effective date of May 17, 2010 set, DOL will likely seek to release new proposed investment advice rules for public comment in early 2010 and finalize the rules by May. DOL is also expected to finalize its long awaited 408(b)(2) plan fee and expense disclosure rules in early 2010.
Meanwhile, on Capitol Hill, House Financial Services Committee Chair Barney Frank announced that the House vote on financial regulatory reform will likely not occur until the second or third week of December. The House Financial Services Committee is still working this week to finalize pieces of the comprehensive legislation the House will consider. Once the legislation is ready, the House is expected to take at least three days to consider the package of financial reforms, including the extension of the fiduciary standard to all investment professionals who provide advice, as detailed in the Investor Protection Act (HR 3817).
In the other chamber of the Capitol, the Senate Committee on Banking will hold its first hearing this morning to consider opening statements on the Restoring American Financial Stability Act of 2009, which is the Senate version of a comprehensive financial regulatory reform package. As I explained in my post last week, the proposed bill also seeks to extend the fiduciary standard, but would take a different statutory approach. Following today's hearing, the Senate Banking Committee is expected to continue its consideration of financial regulatory reform right after Thanksgiving. With the House and Senate separately considering similar financial reforms and time in 2009 quickly running out, it is becoming increasingly likely that a final consolidated bill enacting financial regulatory reforms will not be ready for President Obama's signature until early 2010.
Finally, this past month, the high court was presented with another opportunity to consider fiduciary issues related to fund fees with the filing of a petition for review by employees of Deere & Co. The employees are seeking review of a decision by the U.S. Court of Appeals for the 7th Circuit, which ruled against the employees and found that Deere did not violate its fiduciary duty under ERISA by imprudently selecting investment options with excessive fees. The 7th Circuit denied a petition for rehearing earlier this year, clearing the path for the Deere employees to seek review by the Supreme Court. It remains unclear whether the Supreme Court will take up Hecker v. Deere, and its decision could hinge on its final ruling in Jones v. Harris Associates, which the court heard arguments on earlier this month. Although the Jones case involves fiduciary duties under a different law, the Investment Company Act of 1940, it is tied to the Heckercase because both cases rest on a premise that fund fees are the result of market competition and both cases were decided by the 7th Circuit. A ruling in Jones is not expected until summer of 2010, which could mean the court will not decide whether to take up the Hecker case until then as well.
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