DOL Fiduciary Rule to Go into Effect June 9 | Ed Slott and Company, LLC

DOL Fiduciary Rule to Go into Effect June 9

By Sarah Brenner, JD
IRA Analyst
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The long-running saga of the Department of Labor (DOL) fiduciary rule took another turn on May 22 when Secretary of Labor Alexander Acosta confirmed that there would be no delay in the June 9, 2017, implementation date. Mr. Acosta said that after careful consideration, there was no legal basis to extend the deadline.

Mr. Acosta’s announcement means that on June 9, 2017, parts of the fiduciary rule will go into effect, including final regulations defining who is a “fiduciary,” the Best Interest Contract Exemption (BICE), and the Class Exemption for Principal Transactions (CEPT). There will be a transition period where those relying on these exemptions for covered transactions are required to adhere only to “impartial conduct standards.” The transition period will be from June 9, 2017, through Jan. 1, 2018. The rest of the fiduciary rule is scheduled to go into effect on January 1, 2018.

Delayed Enforcement

On the same day that Mr. Acosta confirmed that the fiduciary rule would go into effect on June 9, 2017, as scheduled, the DOL granted some relief in a Field Service Memorandum. According to the Memorandum, the DOL will not enforce the fiduciary rule during the transition period between as long as fiduciaries are acting diligently and in good faith to comply with the regulations.

The DOL also released a new set of fifteen frequently asked questions (FAQs) providing additional information on the transition period.

Mark the Calendar

It’s been a long road that has taken many years. Despite many expectations to the contrary, you can now mark your calendar. All signs from the DOL indicate that the fiduciary rule will not be delayed further and is set to go into effect on June 9.

Stay Tuned

Is this the end of the story? Not really. What will happen after June 9 is still far from certain. Supporters of the rule see its implementation as a victory. Once the rule has been made effective, they suggest it will be hard to get rid of it.

However, while Mr. Acosta may have found no legal basis to delay the fiduciary rule, his remarks accompanying the announcement signal that the Trump administration has by no means decided to drop its strong opposition to the rule. It is not unlikely that there could be significant changes made to the rule by the DOL during the transition period. It is also possible that Congress or the President could take further action. Court challenges are still happening. One thing that has become clear is that anything is possible with this much delayed and disputed rule. There have been many unexpected turns along the way and this is probably not going to change now.  

Where does all this leave financial advisors and their clients? We know that the DOL fiduciary rule is finally set to go into effect within days. Both advisors and clients should continue to monitor for any late breaking developments. Advisors should remain vigilant and actively continue to prepare for the full implementation of the rule during the transition period between June 9, 2017, and January 1, 2018, while being alert for possible changes coming from the DOL or Congress. Hold on because the ride is likely not over yet!

 

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