DOL Rule Updates

The Department of Labor (“DOL”) published its final rule delaying the applicability dates of its rule changing the definition of the term “fiduciary” (the “Fiduciary Rule”)  by 60 days, as proposed.  The new timeline for compliance with the Fiduciary Rule is as follows:

  • June 9, 2017 – The Fiduciary Rule becomes applicable.
  • June 9, 2017 – Firms relying upon the BIC Exemption  must comply with Impartial Conduct Standards but no additional conditions.
  • June 9, 2017 through December 31, 2017 – the Transition Period (discussed below).  During the Transition Period, DOL will review the Fiduciary Rule and report on the factors outlined in the Presidential Memorandum.
  • January 1, 2018 – Firms relying upon the BIC Exemption must come into full compliance.

As noted above, the final rule adopted a 60-day delay of the applicability date of the Fiduciary Rule from April 10, 2017 to June 9, 2017.  The applicability dates of the Best Interest Contract Exemption (the “BIC Exemption”) were also extended to June 9, 2017.

The BIC Exemption already provided for a “Transition Period” between the original applicability date of the Fiduciary Rule and January 1, 2018, the date when fiduciaries relying on such exemptions are expected to be in full compliance.  The final rule does not change the full compliance date for those exemptions.

The final rule does simplify compliance with the BIC Exemption during the Transition Period.  During the Transition Period, fiduciaries will only be required to comply with the “Impartial Conduct Standards” and not the other conditions of such exemptions, such as the affirmative disclosure requirements.  The Impartial Conduct Standards require that fiduciary advisers make recommendations that are in the customer’s best interest (subject to a prudence and loyalty standard), receive no more than reasonable compensation, and not make materially misleading statements.

The final rule also delays the applicability date for the streamlined “Level Fee Fiduciary” exemption within the BIC Exemption until June 9; however, during the Transition Period, Level Fee Fiduciaries that are eligible for the Transition Period relief under the full BIC Exemption may comply with those conditions (i.e., only the Impartial Conduct Standards) instead.

The future of the Fiduciary Rule continues to be uncertain. DOL has requested comments from interested stakeholders on the issues raised by the Presidential Memorandum by April 17.  Next steps will remain unclear until senior DOL officials are confirmed.  Further delays are possible, followed by modifications or rescission of the rule.

 

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