Fiduciary Rule Effective Date Gap Won’t Trigger DOL Enforcement


The Labor Department announced recently what its enforcement stance will be if it has not decided by April 10 whether that should continue to be the start date for applying its fiduciary rule.

The DOL will not enforce the rule against investment advisers and financial institutions who fall within a compliance gap occasioned by the agency’s delay in making that determination, according to Field Assistance Bulletin 2017-01.

Earlier in March, the DOL proposed to delay the rule’s April 10 starting date until June 9 to give it time to consider whether to revise or rescind the rule in light of a directive from President Trump.

The 60-day postponement would also apply to prohibited transaction exemptions issued in conjunction with the rule in April 2016.

The DOL said in the FAB that it intends to decide prior to April 10 whether or not to delay the rule.

Nervousness Over Gap

Notwithstanding that intention, financial services institutions are concerned “about investor confusion and other marketplace disruption based on uncertainty about whether a final rule implementing any delay will be published before April 10,” the DOL said. They also are concerned that there could be a “gap” period during which the rule becomes applicable before a delay is published after April 10, or that the DOL may decide not to issue a delay, it said.

The relief announced in FAB 2017-01 addresses those contingencies.

The DOL will not enforce the rule against advisers or financial institutions that are out of compliance during a gap period before a delay is implemented, the FAB said. This includes when advisers and institutions fail “to provide retirement investors with disclosures or other documents intended to comply with provisions of the rule or the related PTEs,” it said.

Advisers and financial institutions that have not complied with the rule or PTEs as of April 10 also will not be subject to enforcement, if the DOL decides against delay, if they meet certain conditions, the FAB said. To obtain this relief the adviser or financial institution must send out “required disclosures or other documents to retirement investors, within a reasonable period after” the DOL decides against delay, it said.

The DOL will consider taking additional steps as necessary if other temporary relief is warranted given the circumstances surrounding its decision on the proposed delay of the April 10 start date, the FAB said.

See related story, Financial Advisers Get DOL Guidance on Fiduciary Rule Delay.

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