DOL Fiduciary Rule and SEC request for comments

Published: 02 June 2017

US Secretary of Labor Alexander Acosta has confirmed that the Department of Labor’s Fiduciary Rule will be applicable 9 June 2017.  While acknowledging that the Fiduciary Rule as written may not align with President Trump’s deregulatory goals, Secretary Acosta has found no principled legal basis to change the June 9 date while continuing to seek public input on whether the rule should be revised or revoked.  In addition, DOL released an FAQ on the “Transition Period” - which runs from when the Fiduciary Rule becomes applicable 9 June 2017 (at 11:59pm local time) until the full requirements of the Best Interest Contract Exemption (and other exemptions) are scheduled to be implemented on 1 January 2018. 

In addition, this week the Department of Labor issued a temporary enforcement policy regarding the Fiduciary Rule.  According to Field Assistance Bulletin (FAB) 2017-02, during the Transition Period from 9 June 2017 and ending on 1 January 2018, the Department will not pursue claims against fiduciaries who are working diligently and in good faith to comply with the Fiduciary Rule and exemptions, or treat those fiduciaries as being in violation of the Fiduciary Rule and exemptions. 

The Department of Labor also indicated that the Treasury Department and the IRS have confirmed that their temporary enforcement policy, as previously announced in IRS Announcement 2017-4, will match this “subsequent related enforcement guidance,” from the DOL, such that the IRS also will not apply §4975 of the Internal Revenue Code (which provides excise taxes relating to prohibited transactions) and related reporting obligations during the Transition Period.  The agency guidance does not address the rights or obligations of other parties, such as ERISA plan fiduciaries and participants, that may have a private right of action for breach of fiduciary duty.

The SEC Chairman has separately requested input regarding the DOL Fiduciary Rule and the SEC’s development of its own fiduciary standard for providing investment advice to retail investors. Please contact Jennifer Wood if there is interest in AIMA making early comments through the web link, otherwise we intend to wait and see what any subsequent rule proposal says.