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The Official Delay of the Fiduciary Rule: A Compromise

Former Associate
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On April 7, 2017, the DOL published a final rule, officially delaying the applicability of the Fiduciary Rule for 60 days, until June 9, 2017.

The DOL noted that a full review of the Fiduciary Rule and its impact is likely to take longer than 60 days. However, the DOL expressed reservations about providing a more extended delay of the application of the Rule, given the Department’s prior findings of harm to retirement investors.  Consequently, the final rule on the delay results in somewhat of a compromise.

Specifically, the DOL extended the applicability date for the Fiduciary Rule, the BIC Exemption, and the Principal Transactions Exemption for 60 days. After June 9, 2017, the new definition of the term “fiduciary” will become applicable.  However, the two exemptions will only require fiduciaries to follow the Impartial Conduct Standards for covered transactions.  The Impartial Conduct Standards require advisors to make recommendations that are in the best interests of their clients, avoid misleading statements, and charge no more than reasonable compensation for services.

Compliance with other conditions for the transactions covered by these exemptions, such as requirements to make specific disclosures and representations of fiduciary compliance in written communications with investors, is not required until January 1, 2018.

The DOL hopes to have a full examination of the impact of the Fiduciary Rule, as directed by President Trump’s February 3, 2017 executive memorandum, completed by January 1, 2018.  Thereafter, the DOL noted that some or all of the Fiduciary Rule and the exemptions may still be revised or rescinded.  Until January 1, 2018, and for some time thereafter, the DOL stated that their focus will be on compliance assistance.

For additional information on the process leading up to the decision, please see our blog posts from March 16, 2017, “Update – A Rule Deferred: Department of Labor Delays Implementation of Fiduciary Rule and February 16, 2017, “A Rule Deferred: Department of Labor Delays Implementation of Fiduciary Rule.”