The DOL’s Conflict of Interest/Fiduciary Rule (the Rule) is set to become effective on June 9, 2017. The Best Interest Contract (BIC) Exemption and other related prohibited transaction exemptions will also become effective that day. However, as discussed in previous editions of Compliance Corner, the DOL has established a temporary enforcement policy due to President Trump’s request for additional analysis of the rule and its impact on American investors. To provide additional information on the implementation of the Rule, the DOL recently provided a Field Assistance Bulletin (FAB) and a set of FAQs.
Field Assistance Bulletin No. 2017-02
On May 22, 2017, the DOL issued Field Assistance Bulletin No. 2017-02. This FAB reiterates that the DOL will implement a temporary enforcement policy. Specifically, the DOL will not pursue claims against fiduciaries who are working in good faith to comply with the rule during the transition period (June 9, 2017 – Jan. 1, 2018).
The DOL also announced their intent to issue a Request for Information (RFI), which will seek additional public input on possible new exemptions from or regulatory changes to the rule. As a part of the RFI, the DOL is looking for comments on whether firms will need additional time (beyond the Jan. 1, 2018 date) to develop new business models to comply with the rule.
Conflict of Interest FAQs (Transition Period)
The DOL also released a set of FAQs in May. The FAQs answer possible questions about the transition period that will occur between the effective date of the rule and Jan. 1, 2018. The FAQs go into detail about how firms will comply with the rule during that time. Essentially, during the transition period, firms and advisers will need to comply with the “impartial conduct standards” that are prescribed by the rule. These standards require advisers and financial institutions to give advice that is in the “best interest” of the retirement investor, charge no more than reasonable compensation and make no misleading statements about investment transactions, compensation and conflicts of interest.
The FAQs go on to discuss the fact that the DOL will still conduct an analysis of the rule, per the President’s instruction. They also clarify that compliance is not required by close of business on June 9; instead, institutions must comply by 11:59 p.m. that day.
Other questions discuss firms’ compensation systems, the use of robo-advice and transactions involving IRAs. Notably, one FAQ reiterates that furnishing plan information and general financial, investment and retirement information is not investment advice that is covered by the rule.
The DOL ends the FAQs by reasserting that compliance assistance is their goal, rather than citing violations and imposing penalties.
Summary
Since the rule will become effective in the next couple of weeks, many firms have already begun to alter processes to come into compliance. Although the effective date of the rule won’t affect employers in a substantial manner, we will continue to follow the developments and report on any additional DOL guidance in Compliance Corner.
Field Assistant Bulletin No. 2017-02 »
Conflict of Interest FAQs »