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DOL Fiduciary Rule—Not Delayed Yet

60-day delay proposed, comments requested on president’s study.

The US Department of Labor (DOL) has proposed to delay the applicability date of the fiduciary rule (and related prohibited transaction exemptions) by 60 days and has also requested comments to help it complete a study that President Donald Trump ordered in the Presidential Memorandum.

What you need to know

  • The proposed delay is 60 days, which would make June 9 the new compliance date. This is less than the widely anticipated 180-day delay.

  • It would not affect the January 1, 2018, date for compliance with the full conditions of the Best Interest Contract and Principal Transaction Exemptions.

  • The comment period on the proposal ends March 17, 2017. The DOL has specifically requested comments on

    • whether the benefits of a 60-day delay justify its costs, including the potential losses to affected retirement investors;

    • the length of the delay;

    • whether it should delay applicability of all, or only part, of the final rule’s provisions and exemption conditions (e.g., should the DOL delay the exemptions’ notice and disclosure provisions, but allow the impartial conduct standards to become applicable on April 10?); and

    • the cost and regulatory impact analyses related to the delay.

  • The proposed delay is subject to the Congressional Review Act, requiring good cause to be shown for the final rule to become effective upon publication in the Federal Register. The proposed delay is also categorized as an “economically significant regulatory action” and must be accompanied with an economic impact analysis.

Can we count on a delay?

The delay is not final yet, and the following steps need to be taken before it  can be effective:

  1. The comment period, scheduled to end on March 17, must be completed;

  2. the DOL will need to review and address the comments it receives, and prepare a final rule delaying the applicability date;

  3. the delay will then need to be resubmitted for review by the Office of Management and Budget (OMB); and

  4. subject to the OMB’s approval of the delay,, the DOL will publish the final rule in the Federal Register, formally adopting the delay.

The time it takes to complete each step can vary, and we note that the April 10 applicability date is now less than 40 days away.

What comments did the DOL request on the fiduciary rule itself?

In addition to proposing a delay, the DOL has also requested comments on a wide range of issues related to the questions raised in the Presidential Memorandum and generally on questions of law and policy concerning the fiduciary rule and related exemptions.

The DOL’s questions are included in Part C of the preamble to the proposed delay and include such topics as how the fiduciary rule has impacted the markets for investment advice; the fiduciary rule’s impact on costs, availability of products and services; and firms’ strategies for, and costs associated with, compliance with the fiduciary rule.

The comment period for these issues ends April 17, 2017.

What should firms do now?

We strongly encourage firms to submit comment letters on the delay, as well as on the substantive questions the DOL has raised on the fiduciary rule itself. Given the short period for comments on the delay, we suggest that firms consider first commenting on the delay and then separately addressing substantive issues on the fiduciary rule. Firms may also want to consider ways to help the DOL complete its review of comments on the delay as quickly as possible.

We also emphasize that the proposed delay will not be effective until the DOL issues a final rule. Until then, April 10, 2017, is still the rule’s applicability date. As such, firms are advised to carefully consider their compliance strategies, business models, and communications with their representatives, employees, clients, and potential customers. Important here will be developing contingency plans to address the possibility of an April 10 or delayed effective date.

Copyright © 2022 by Morgan, Lewis & Bockius LLP. All Rights Reserved.National Law Review, Volume VII, Number 65
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About this Author

Daniel Kleinman, Morgan Lewis, Labor and employment lawyer
Partner

Daniel R. Kleinman advises businesses on the fiduciary responsibilities provisions (Title I) of the Employee Retirement Income Security Act (ERISA). He also counsels these clients on related tax, corporate, and securities laws in connection with the structuring and marketing of investment products (including private equity and hedge funds) and financial services to employee benefits plans. Additionally, Daniel handles issues related to the regulation of broker-dealers and investment advisers under US federal and state securities laws.

202-739-5143
Michael Richman, Employment attorney, Morgan Lewis
Partner

Michael B. Richman counsels clients on the fiduciary responsibility rules under the Employee Retirement Income Security Act (ERISA), including the ERISA prohibited transaction rules. He advises plan sponsors on investment matters for defined benefit and defined contribution plans. He also counsels banks, investment adviser firms, and broker-dealer firms on ERISA compliance for ERISA plan separately-managed accounts, collective investment funds, private funds, and other arrangements. Additionally, he provides guidance to IRA custodians on permissible IRA investments and...

202-739-5036
Lindsay Jackson, Morgan Lewis, Employment attorney
Partner

Lindsay B. Jackson counsels financial services clients on issues that arise under the Employee Retirement Income Security Act (ERISA) fiduciary responsibility and prohibited transaction rules. Clients turn to her for guidance on ERISA and IRC compliance when providing services to plans and IRAs. Lindsay also negotiates private fund investments and other service provider agreements on behalf of plans and plan asset entities. She advises clients involved in US Department of Labor and SEC examinations and investigations.

202-739-5120
Callie M. Kim, Morgan Lewis, employee benefits lawyer, executive compensation attorney
Associate

Callie M. Kim focuses on employee benefits and executive compensation for public and private companies. Callie helps companies design and implement compensation plans to attract, motivate, and retain top talent. She advises on qualified and nonqualified retirement plans, health and welfare plans, and executive compensation arrangements. She also counsels clients on the legal issues arising under ERISA, the Internal Revenue Code, and securities laws. Callie draws on prior professional experience in emerging growth companies to bring an accessible, practical, and client-...

215-963-5612
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