“Fiduciary Rule” Will Not Be Enforced Until Effective Date Is Cleared Up

In its latest release concerning the fiduciary rule, the Department of Labor has issued a “field assistance bulletin” to clarify the fast-approaching April 10 effective date, and what would happen if a final decision on the delay has not been reached before the official implementation date. This is a welcome announcement to financial services firms that have been in limbo since President Trump’s directive to review and potentially revise or rescind the rule, in addition to the DOL’s subsequent proposal to delay the rule’s applicability date by 60 days.

Although the DOL has said that it plans to issue a decision on whether to delay implementation of the rule before its execution date, firms and reps have been apprehensive about the outcome if a final ruling has not been made prior to April 10. The industry is also concerned that if the DOL decides not to issue a delay, firms and reps would have little time to comply with the comprehensive rule. The DOL has alerted the industry in its bulletin that it will not enforce the rule in the short term, and acknowledged that:

“Financial services institutions have expressed concern about investor confusion and other marketplace disruption based on uncertainty about whether a final rule implementing any delay will be published before April 10, whether there may be a ‘gap’ period during which the fiduciary duty rule becomes applicable before a delay is published after April 10.”

As a result of this uncertainty, the DOL has come up with a “temporary enforcement policy.” It is designed to provide firms with guidance concerning the “gap” in time that was created by the rule delay, which outlines and gives guidance on two different scenarios.

In the first scenario, if the DOL issues a final decision, which does delay the rule after the April 10 effective date, the DOL will not initiate an enforcement action, because a rep or firm did not satisfy conditions of the rule during the gap period.

In the second scenario, if the DOL does not delay the rule, the DOL will not initiate an enforcement action, because a rep or firm failed to comply with the rule by the April 10 effective date. This includes sending out required disclosures or other documents to retirement investors, for a “reasonable period of time,” after the decision to not delay the rule was published.

As we said in our last blog post about the fiduciary rule, “Stay tuned for more fiduciary fun!” All of these alerts are certainly keeping the retirement services industry on its toes!