The new applicability date for the Department of Labor (DOL) fiduciary rule and its accompanying exemptions is January 1, 2019, according to an as-yet-unpublished notice that will soon appear in the Federal Register.
This extension will presumably give the Trump administration more time to consider what it will ultimately do with the signature Obama-era rulemaking. In particular, this additional year of transition should give the DOL and the White House a more reasonable amount of time to consider the vast amount of industry commentary submitted in response to President Donald Trump’s request for information about the initial and potential impacts of the fiduciary rulemaking.
The newly emerged delay document proposes to “extend the special transition period under sections II and IX of the Best Interest Contract Exemption [BICE] and section VII of the Class Exemption for Principal Transactions in Certain Assets Between Investment Advice Fiduciaries and Employee Benefit Plans and IRAs.” The document “also proposes to delay the applicability of certain amendments to Prohibited Transaction Exemption 84-24 for the same period.”
As the DOL lays out, the “primary purpose of the proposed amendments is to give the department the time necessary to consider possible changes and alternatives to these exemptions. The department is particularly concerned that, without a delay in the applicability dates, regulated parties may incur undue expense to comply with conditions or requirements that it ultimately determines to revise or repeal”
The present transition period, which started June 9, 2017, will very quickly close on January 1, 2018, if no additional delay is provided. Interested parties will have 15 days to offer comments on this additional proposed delay, but given that short time period and the fact that this move has widely been expected, it seems clear that the Trump administration intends to implement and enforce this delay as currently proposed.
The retirement and investment industries were quick to react to this development. Dale Brown, Financial Services Institute President and CEO, issued a statement summarizing the opinion of those who are skeptical of the rule changes and voicing support for the DOL’s proposed second delay.
“It has only been a few months since the impartial conduct standards went in place, but we have already seen investor choice limited and retirement savings advice pushed out of the reach of those who need it most,” he claims. “In our previous comment letters to the DOL we have requested a delay of the rule’s implementation precisely for the reasons the Department outlines in its proposal. President Trump ordered a full review of the rule and its impacts, and it is critical that the DOL completes that review.”
In addition to the wholesale rule review, FSI “hopes the DOL uses the proposed 18-month delay to coordinate with regulators, including the Securities and Exchange Commission (SEC), to simplify and streamline the rule.”