DOL Issues Field Assistance Bulletin in Response to the Fifth Circuit's Rejection of the DOL Fiduciary Rule

by Bryan Cave Leighton Paisner

On March 15, 2018, the United States Court of Appeals for the Fifth Circuit struck down the Department of Labor’s (DOL) fiduciary duty rule in a 2-1 decision.  While the court has denied motions filed by, among others, the attorneys general of California, New York and Oregon to intervene in the case, as of May 7, 2018, the Mandate had not issued.  The deadline for filing a petition for writ of certiorari to the United States Supreme Court is June 13, 2018.

In rejecting the DOL’s rule, the Fifth Circuit’s holding is consistent with the positions of the United States Chamber of Commerce, the National Association for Fixed Annuities (NAFA) and the Securities Industry and Financial Markets Association (SIFMA), as well as others. In sum, the Fifth Circuit concluded that the DOL exceeded its authority in adopting a rule that the Court deemed to be overly broad and in conflict with aspects of the Employee Retirement Income Security Act (ERISA).  The practical impact of the decision is that upon entry of the Mandate, absent further judicial intervention, the DOL fiduciary duty rule’s broadened definition of fiduciary is not the standard and the Best Interest Contract Exemption and the Principal Transaction Exemption, among other exemptions, are not the law.

In light of the potential confusion created by the Fifth Circuit decision and the anticipated Mandate, the DOL issued a Field Assistance Bulletin that, in essence, continues the temporary enforcement first implemented June 9, 2017, in the face of a Presidential directive to the DOL to further review the Rule prior to implementation. The DOL issued yesterday’s Bulletin likely in anticipation of questions from industry and retirement investors regarding the applicable definition of a “fiduciary” and the availability of any exemptions.

The prior and now current DOL policy with respect to enforcement of the proposed DOL fiduciary duty rule is that the DOL “will not pursue prohibited transactions claims against investment advice fiduciaries who are working diligently and in good faith to comply with the impartial conduct standards for transactions that would have been exempted in the Best Interest Contact and Principal Transactions Exemptions, or treat such fiduciaries as violating the applicable prohibited transaction rules.”

The current state of affairs is a win for those who believe that the DOL rule was overbroad and potentially detrimental to the interests of investors. Given the Fifth Circuit ruling, the legacy definition of “fiduciary” will again be the governing standard and the old factors will apply:  (1) “individualized” advice, (2) provided on a “regular basis,” (3) under a “mutual understanding,” and (4) intended as the “primary basis” for an investment decision.

In the face of the rejection of the DOL fiduciary duty rule, the Securities and Exchange Commission (“SEC”) stepped in with a proposal of its own – “Regulation Best Interest.” The SEC’s proposal does not specifically impose a fiduciary standard on brokers and does not define “best interest.”  Consequently, the North American Securities Administrators Association (NASAA) and others who advocated for the DOL proposed rule view the SEC proposal with skepticism.

Going forward, we anticipate efforts to reconcile some aspects of the DOL rule with the standard of conduct proposed by the SEC. We also expect that various states will continue to pursue their own “fiduciary” standards. Finally, NASAA has also hinted that it may be coming forward with its own model act that would characterize a broker as a fiduciary if providing advice with respect to the rollover of any retirement assets. Such uncertainty in the regulatory landscape militates in favor of a slow or measured approach in contemplating any changes to a firm’s business model, policies and procedures.

Finally, firms should recognize that in the face of the Fifth Circuit decision, the BIC and Principal Transaction Exemptions are not available exemptions. Consequently, any firm relying on those exemptions in connection with the performance of any fiduciary duty is no longer protected by those exemptions and consideration of valid exemption may be appropriate (i.e., PTE 86-128 (prior versions applicable to discretionary and non-discretionary advice); PTE 84-24 (applicable to annuities); PTE 77-4 (applicable to affiliated mutual fund transactions)).

[View source.]

Written by:

Bryan Cave Leighton Paisner

Bryan Cave Leighton Paisner on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.