DOL Gives Industry Some ‘Waiting’ Room

By Nevin Adams • April 05, 2017 • 0 Comments
The Labor Department made it official yesterday, pushing the April 10 applicability date of the fiduciary rule back the widely anticipated 60 days to June 9 – but providing some additional compliance space on the Best Interest Contract Exemption.

Specifically, while the Labor Department also extended by 60 days the applicability dates of the Best Interest Contract Exemption and the Class Exemption for Principal Transactions in Certain Assets Between Investment Advice Fiduciaries and Employee Benefit Plans and IRAs, in a significant shift, it now says that fiduciaries relying on these exemptions adhere only to the Impartial Conduct Standards (including the “best interest” standard, charging reasonable compensation and not making any materially misleading statements) from June 9, 2017, through Jan. 1, 2018. 

“After the passage of a year since the Rule and PTEs were published, and based on public comment, the Department finds little basis for concluding that advisers need more time to give advice that is in the retirement investor’s best interest and free from misrepresentations in exchange for reasonable compensation,” the Labor Department said. 

Additionally, they noted that, because the provisions requiring written representations and commitments about fiduciary compliance, execution of a contract, warranties about policies and procedures and the prohibition on imposing arbitration requirements on class claims would not go into effect during this period, “…this approach eliminates or minimizes the risk of litigation, including class-action litigation, in the IRA marketplace, one of the chief concerns expressed by the financial services industry in connection with the Fiduciary Rule and PTEs.”

Also delayed is the applicability of amendments to PTE 84-24 (until Jan. 1, 2018), other than the Impartial Conduct Standards, which will become applicable on June 9, 2017. Finally, they extended for 60 days the applicability dates of amendments to other previously granted exemptions. 

Will that be the end of it? Well, the Labor Department noted that, if after receiving comments on the issues raised by the President’s Feb. 3 Executive Memorandum, it either concludes that significant changes are necessary or that it needs more time to complete its review, “…it retains the ability to further extend the January 1, 2018 applicability dates or to grant additional interim relief, such as more streamlined PTEs, as it finalizes its review and decides whether to make more general changes to the Rule or PTEs.”

Stay tuned.





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