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Sign of Future Changes? DOL Proposes 18-Month Extension of Transition Period for Compliance With ERISA "Fiduciary Investment Advice" Rule

On August 9, the US Department of Labor (DOL) announced in a court filing that it has proposed an 18-month extension of the full implementation of the Best Interest Contract Exemption (the "BIC Exemption") under the ERISA fiduciary investment advice rule. The Proposed Extension would also apply to the Principal Transaction Exemption and Prohibited Transaction Exemption 84-24 (together with the BIC Exemption, the "Exemptions"). In April of this year, the DOL extended the effective date of the Rule until June 9 and limited the requirements of the Exemptions to only require compliance with the "impartial conduct standards" (ICS) through December 31 (the "Transition Period"). If the Proposed Extension is approved, full compliance with the Exemptions will not be required until July 1, 2019.

As described in our earlier advisory, "Compliance With the ERISA Fiduciary Advice Rule for Private Investment Fund Managers and Sponsors and Managed Account Advisers: Beginning June 9, 2017," compliance with the ICS generally requires that an investment advice fiduciary (1) act in the "best interest" of plan participants and IRA owners; (2) receive no more than "reasonable compensation" (as defined under ERISA and the Internal Revenue Code); and (3) make no materially misleading statements about recommended transactions, fees, compensation and conflicts of interest.

The Proposed Extension was submitted to the Office of Management and Budget (OMB) in the form of an amendment to each of the Exemptions.

©2017 Katten Muchin Rosenman LLP

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About this Author

Henry Bregstein, Katten Muchin Law Firm, Financial Institutions Legal Specialist
Partner

Henry Bregstein is the global co-chair of the firm’s Financial Services practice and a member of the firm’s Executive Committee and Board of Directors. In his role as partner in the Financial Services practice, he advises banks, domestic and offshore hedge funds, private equity funds, life insurance companies, family offices, sovereign wealth funds, investment advisers and broker-dealers on regulatory, securities, tax, finance, licensing, corporate and other legal matters.

Henry provides guidance on fund formation and regulatory compliance and advice related to...

212-940-6615
Wendy E. Cohen, Financial Services Lawyer, Katten Muchin Law firm
Partner

Wendy E. Cohen represents investment managers and other sponsors of domestic and offshore securities and commodities hedge funds, funds of funds and other public and private pooled investment vehicles, as well as their service providers, including their managers, brokers, financial intermediaries and other financial institutions, and investment professionals. She provides advice on all corporate and related matters facing investment funds, including structure and organization, ongoing operations, restructuring and dissolution.

Having practiced for more than 25 years in the financial services space with a focus on public and private investment funds, Wendy has amassed considerable experience relating to domestic and offshore offering requirements, 1933 Act and 1934 Act compliance, the application of Advisers Act regulations and 1940 Act avoidance.

212-940-3846
David Y. Dickstein, Financial Services Lawyer, Katten muchin law firm
Partner

David Dickstein represents broker-dealers, investment advisers, investment companies and hedge funds in connection with a variety of regulatory, compliance and operational matters. David regularly counsels investment advisers on registration and regulatory matters, such as the need for registration, conflict of interest disclosures, soft dollars and best execution, firm advertising and marketing, federal and state pay-to-play matters, trade allocations and personal trading. He also advises broker-dealers on registration and ongoing compliance matters, mutual fund supermarkets...

212-940-8506
Jack P. Governale, Katten Muchin Law Firm, Financial Services Attorney
Partner

Jack P. Governale is the head of Katten’s New York Financial Services practice. Jack is a Registered Foreign Lawyer and a non-practicing partner in Katten Muchin Rosenman UK LLP. He concentrates his practice in the area of investment management, representing domestic and offshore private investment funds and their managers, as well as investment advisers, commodity pool operators, and commodity trading advisors.

Jack advises his fund and investment manager clients on a broad range of securities and futures regulatory matters arising under the Securities Act, the...

212-940-8525
Christian B. Hennion, Finance Attorney, Katten Muchin Law Firm
Associate

Christian B. Hennion concentrates his practice in financial services and asset management matters, including counseling fund managers, registered investment advisers and commodity trading advisors on both transactional and regulatory matters. Chris has advised a wide range of US and international managers, from start-ups to large institutions, regarding a variety of matters, including private fund launches and reorganizations, advisory engagements, Investment Advisers Act and Commodity Exchange Act compliance obligations, Securities and Exchange Commission (SEC) and Commodity Futures...

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