DOL Fiduciary Rule: Actions in 2017

The Department of Labor’s (DOL) final fiduciary rule, entitled “Definition of the Term ‘Fiduciary’; Conflict of Interest Rule – Retirement Investment Advice,” was published in the Federal Register on April 8, 2016, became effective on June 7, 2016, and had an applicability date of April 10, 2017. Likely however, the applicability date has been pushed back to June 9, 2017 and may be further delayed or overturned.

This has caused confusion in the industry, with the DOL acknowledging that financial services institutions have expressed concern about investor confusion and other marketplace disruption based on uncertainty about whether a final rule implementing any delay will 1) be published before April 10th, 2) whether there may be a ‘gap’ period during which the fiduciary duty rule becomes applicable before a delay is published after April 10th, or 3) whether the Department may decide either before or after April 10th not to issue a delay based on its evaluation of public comments.

Below is a brief timeline of regulatory actions regarding the delay and resulting market confusion:

• February 3rd, the Trump administration released a Presidential Memorandum on Fiduciary Duty Rule directing the DOL to conduct an examination of the regulation to determine whether the final fiduciary rule may adversely affect the ability of Americans to gain access to retirement information and financial advice, and to prepare an updated economic and legal analysis concerning the likely impact of the final rule as part of that examination.
• March 2nd, the DOL published the proposal to delay the applicability date by 60 days in the Federal Register. This delay includes a 15-day comment period on the delay and a 45-day comment period on the issues raised in the February 3rd President Memorandum.
• March 10th, the DOL issued an enforcement bulletin that includes a temporary enforcement policy to address the industry concerns noted above.

Temporary enforcement policy

In recognition of the transitional and other concerns, the DOL is adopting the following temporary enforcement policy:

• In the event that the DOL issues a final rule after April 10th, implementing a delay in the applicability date of the fiduciary duty rule and related PTEs, the department will not initiate an enforcement action because an adviser or financial institution did not satisfy conditions of the rule or the PTEs during the “gap” period in which the rule becomes applicable before a delay is implemented – including a failure to provide retirement investors with disclosures or other documents intended to comply with provisions of the rule or the related PTEs.
• In the event that the DOL decides not to issue a delay in the fiduciary duty rule and related PTEs, the department will not initiate an enforcement action because an adviser or financial institution, as of the April 10th applicability date of the rule, failed to satisfy conditions of the rule or the PTEs provided that the adviser or financial institution satisfies the applicable conditions of the rule or PTEs – including sending out required disclosures or other documents to retirement investors within a reasonable period after the publication of a decision not to delay the April 10 applicability date. The department will also treat the 30-day cure period under Section IX(d)(2)(vi) of the BIC Exemption and Section VII(d)(2)(v) of the Principal Transactions Exemption as available to financial institutions that, as of the April 10th applicability date, did not provide to retirement investors the disclosures or other documents described in Section IX(d)(2)(vi) of the BIC Exemption and Section VII(d)(2)(v) of the Principal Transactions Exemption.

To the extent that circumstances surrounding the decision on the proposed delay of the April 10th applicability date gives rise to the need for other temporary relief, including prohibited transaction relief, the Employee Benefits Security Administration (EBSA) will consider taking additional steps as necessary.