On Aug. 31, 2017, the DOL proposed an extension of the fiduciary rule’s transition period — the rule became effective on June 9, 2017, however, the best interest contract (BIC) exemption and other related prohibited transaction exemptions were not going to become effective until Jan. 1, 2018. The DOL is now seeking to extend the transition period from Jan. 1, 2018 to July 1, 2019.
As we’ve reported in previous issues of Compliance Corner, President Trump requested that the DOL re-examine the rule to determine if it is harmful to American investors. Although the DOL was unable to further delay the effective date of the rule (past June 9, 2017), they did request comments from the public on the rule and on its review. Some of those comments expressed the fact that there is not enough time between now and the Jan. 1, 2018 applicability of the BIC and other related exemptions for the DOL to review the rule. The DOL agreed and expressed a concern that without a delay in the applicability date, parties could incur undue expenses in seeking to comply with a law that could eventually change.
In proposing an extended transition period, the DOL also requested various comments pertaining to the rule. Specifically, they requested comments on how the delay should be structured – based on a fixed period, a contingent delay, or a combination of the two – and on the extension of their temporary enforcement policy. The deadline for comments is Sept. 15, 2017. Additionally, the DOL signaled a desire to coordinate with the SEC on any changes to the rule and to create new and more streamlined exemptions that would recognize innovations in the financial services industry.
The DOL also released Field Assistance Bulletin (FAB) 2017-02, which announces that the DOL will not pursue claims based on arbitration limitation failures. Under the rule, the BIC exemption and other related exemptions are not available to a party if the financial institution’s contract with a retirement investor includes a waiver or qualification of the retirement investor’s right to bring or participate in a class action or other representative court action. The FAB makes it clear that the DOL is essentially no longer defending that provision — as also evidenced by their filings in recent court cases.
Ultimately, the rule is still under review by the DOL and they will likely use the new proposed transition period to determine possible changes to the rule. We’ll continue to monitor new developments and report on them here.
Proposed Rule »
Field Assistance Bulletin 2017-03 »