Fiduciary Rule Stalled, Implementation Not Expected until June 2017

We last considered the state of the Department of Labor’s fiduciary rule in late February 2017. At the time, analysts and commentators will still assessing the impact President Trump’s February 3, 2017, memorandum would have on the rule. The memorandum delayed implementation by 180-days and instructed the Department of Labor to conduct a new economic analysis regarding the costs and burdens the rule would impose. It was also noted that recent court rulings seemed to signal the rule would arrive in some form although the time frame was uncertain.

New developments may permit the Department of Labor to phase-in the rule more quickly than expected. However, these efforts may be subject to additional delay due to calls by major financial brokers.

DOL Memorandum Indicates 60-Day Delay may be Possible

On March 10, 2017, the DOL issued its own memorandum, Field Assistance Bulletin No. 2017-01, in response to President Trump’s February 3^rd memo. This memorandum indicated the possibility of a 60-day delay. A 60-day delay would have allowed the rule to go into effect on April 10, 2017. Under this timeline, the rule would have been phased-in by January 1, 2018.

Vanguard and Blackrock Called for Substantial Delay

In late March 2017, Vanguard and Blackrock – two of the world’s largest asset managers – called for a significantly more substantial delay in the rule’s implementation. The companies cited industry and consumer confusion regarding the standard due to frequent alterations in the rule’s implementation timeline.

The DOL generally found Vanguard and Blackrock’s concerns unconvincing. The Department wrote, “..the Department has concluded that it would be inappropriate to broadly delay application of the fiduciary definition and Impartial Conduct Standards for an extended period in disregard of its previous findings of ongoing injury to retirement investors.”

Department Indicates New June 2017 Fiduciary Rule Implementation Date

On April 5, 2017, the DOL published a final rulemaking document indications that the rule would not be implemented starting on April 10. Rather, the DOL recognized the that request by President Trump required additional time to ensure a “careful and thoughtful” process. However, as noted above, the Department also recognized that it would be inappropriate to further delay the rule. As such, DOL indicated that the rule is now scheduled to be implemented on June 9, 2017.

Uncertainty Still Surrounds Ordered Review of Rule

Despite a new projected implementation date, many commentators are still concerned regarding the uncertainty surrounding the timeframe to complete the requested economic review and analysis. Furthermore, some uncertainty exists over the actions the executive branch will take once this review is complete.

However, covered organizations still continue to face an impending implementation of the fiduciary rule. While exemptions in the phase-in period will continue to exist until January 1, 2018, organizations will need to ramp-up compliance efforts long before this date. A failure to engage in careful legal and compliance planning now, may create significant potential legal liability if the rule is implemented according to schedule.

Rely on More than 20 Years of Guidance for Investment Firms and Fiduciaries

Attorney William S. Heyman has represented firms, advisors, and fiduciaries for more than 20 years. Mr Heyman can assess your organization’s policies and practices for compliance issues under existing and new laws and regulations. To schedule a confidential consultation at the Baltimore-based Law Office of William S. Heyman, please call (410) 305-9287 today.