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The Fiduciary Rule is Alive

According to U.S. Labor Secretary Alexander Acosta, the Department of Labor’s Fiduciary Rule will become effective on June 9th. As discussed in our May 9th article, the Rule’s expanded definition of “fiduciary” will apply, and advisers and financial institutions providing investment advice as fiduciaries must comply with the Rule’s “impartial conduct” standards, beginning on June 9, 2017. At this time, the full scope of the Fiduciary Rule and its related prohibited transaction exemptions will be applicable on January 1, 2018.

Prior to the DOL issuing its final rule to delay the Rule’s applicability until June 9th, the DOL and the Internal Revenue Service (“IRS”) issued Field Assistance Bulletin 2017-01 and IRS Announcement 2017-4 stating that the DOL and IRS would not seek to enforce compliance with the Fiduciary Rule or excise taxes relating to prohibited transactions. In Field Assistance Bulletin 2017-02, the DOL extends its commitment to not pursue claims against an adviser or financial institution during the Transition Period of June 9, 2017 through December 31, 2017, as long as such parties are working in good faith to comply with the Rule and related exemptions. In addition, the Bulletin confirms the Treasury Department’s and IRS’s agreement to not apply potential excise taxes for related prohibited transactions.

The DOL also released new FAQs to provide guidance to the financial services industry during the Transition Period. Among other things, the FAQs clarify that the DOL will issue a Request for Information (“RFI”) for additional public comments, including comments on whether an additional delay beyond the current January 1, 2018 applicability date is needed. The purpose of the RFI is to assist the DOL with analyzing whether the Rule limits investor access to retirement information and advice, and to evaluate whether new exemptions or other changes to the Rule are needed. Thus, the Fiduciary Rule could still be repealed or revised once the DOL completes its review.

For now, advisers and financial institutions should continue to move forward with their efforts to comply with the Rule. In addition, the financial services industry should watch for the DOL’s RFI and be prepared to provide comments as the saga of the Fiduciary Rule continues.

This blog post was drafted by Beth Miller, an attorney in the Spencer Fane LLP Overland Park, KS office. For more information, visit spencerfane.com.