DOL Seeks To Clarify Fiduciary Rule Timing With Temporary Enforcement Policy

From Ulmer’s Broker Dealer Law Corner Blog
By Frances Floriano Goins and Patricia Shlonsky

On Friday evening, March 10, 2017, the Department of Labor (DOL) issued a field assistance bulletin establishing a new temporary enforcement policy for the DOL Fiduciary Rule set to become effective on April 10, 2017. (See here) The temporary policy was designed to deal with industry uncertainty created by a new rule proposed for comment by the DOL on March 2, 2017 in response to a Presidential Memorandum to the Secretary of Labor, dated February 3, 2017 (discussed on Ulmer’s BD Law Corner blog, here). That memorandum directed the DOL to examine whether the Fiduciary Rule might adversely affect “the ability of Americans to gain access to retirement information and financial advice” among other things. The President’s directive can only be accomplished by issuing a new rule because the Fiduciary Rule has already become final.

The DOL’s newly proposed rule is subject to a 60-day comment period under applicable law, making it questionable whether the DOL will be able to digest comments and issue a final rule potentially delaying the effective date of the Fiduciary Rule before its current effective date of April 10. Needless to say, this uncertainty created market disruption, with some financial services firms proposing to communicate to investor and IRA clients that they would only become a “fiduciary” when and if the Fiduciary Rule became applicable. Based on industry comments, the DOL “determined that temporary enforcement relief is appropriate to protect against investor confusion and related marketplace disruptions” while this all plays out. To that end, the temporary enforcement policy also gives firms additional time to implement policies required by the Fiduciary Rule after the DOL finalizes the new rule.

Critically, Friday’s bulletin emphasizes that any implementation of the Fiduciary Rule by the DOL “will be marked by an emphasis on assisting (rather than citing violations and imposing penalties on)” institutions and persons who are “acting in good faith” to implement the Fiduciary Rule. For the sake of the affected financial services firms and individuals, we certainly hope this is true, although past regulator performance might suggest a different outcome.