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On April 7, 2017, the Department of Labor (“DOL”) published the extension of the applicability date for the Conflicts of Interest Rule, otherwise known as the DOL Fiduciary Rule, in the Federal Register. The 60-day extension designates June 9, 2017 as the new applicability date but leaves unchanged the final rule’s full applicability date of January 1, 2018. Accordingly, the extension has designated the time between June 9, 2017 and January 1, 2018 as the “Transition Period.”
The Presidential Memorandum dated February 3, 2017 directed the DOL to conduct a review of the Fiduciary Rule to determine its impact on Americans’ ability to gain access to financial advice regarding their retirement investments. As part of the review, the memorandum directed the DOL to examine the following:
As part of this review, the DOL held a comment period through March 17, 2017, regarding the proposed delay. The DOL will also accept comments through April 17, 2017, regarding the review of the Fiduciary Rule mandated by the Presidential Memorandum.
By the time it announced the delay, the DOL had received 15,000 comments in support of a 60-day or greater delay and 178,000 comments opposed. Those in support of the delay suggested the DOL Fiduciary Rule would result in increased costs and a corresponding decrease in services to investors. Those in opposition to the delay cited the increased cost to investors as a result of conflicted advice given by advisers. In describing the rationale for the decision to delay the April 10, 2017, applicability date of the Fiduciary Rule, the DOL noted that adherence to the rule would result in a chaotic transition as financial institutions endeavored to comply with the rule, causing investor confusion and reduced access to advisory services.
In delaying the applicability date to June 9, 2017, the DOL also changed certain requirements of the DOL Fiduciary Rule, as well as the associated PTEs firms and advisers need to follow during the Transition Period. During the Transition Period firms and advisers must
The following changes apply to the Transition Period:
The ultimate fate of the current Fiduciary Rule remains unknown while the DOL conducts its reviews pursuant to the Presidential Memorandum. The filing also indicates that the DOL may impose further delays during its review.
The uncertainty surrounding the DOL Fiduciary Rule raises questions about how firms and advisers should proceed. At the very least, firms should expect to comply with the requirements of the Impartial Conduct Standards:
In summary, while the DOL Fiduciary Rule has been delayed, it has not been eliminated. The delay grants the industry an additional 60 days to comply with the rule, and during the Transition Period firms only need to adhere to the Impartial Conduct Standards while providing investment advice to retirement investors. Although the requirements for compliance during the Transition Period have eased, firms must have some type of program in place to evidence adherence to these standards. Firms also need to plan for compliance based on the most recent information as long as the rule’s future remains unknown.
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If you have questions regarding any of these issues or requirements, please contact your ACA consultant or Dee Stafford at 310-322-8840.