DOL May Delay Implementation of Fiduciary Rule

by Liskow & Lewis
Contact

The Department of Labor in a brief filed in a Minnesota lawsuit on August 9, 2017 revealed that DOL had submitted to the Office of Management and Budget a proposal to delay the implementation of remaining parts of the DOL fiduciary rule from Jan. 1, 2018, until July 1, 2019.  This would delay the implementation of the BICE and BICE Lite procedures that will cause serious adjustments to most advisers’ business model and procedures.  The postponement of the effective date is not official yet, as it has to be approved by the Office of Management and Budget —a process that can take as long as 90 days.

Background on the DOL Fiduciary Rule

The Department of Labor (DOL) Fiduciary Rule is a new regulation that expands the “investment advice fiduciary” definition under the Employee Retirement Income Security Act of 1974 (ERISA).  It essentially elevates all financial professionals who work with retirement plans or provide retirement planning advice to the level of a fiduciary.  For investment advisers, the rule imposes significant burdens on advisers that receive other than asset based fees (level-fee fiduciary).  These advisers will have to comply with the Best Interest Contract Exemption (BICE), which will require significant revisions to procedures, contracts, and websites.  Advisers who are asset based/level fee advisers may rely on BICE Lite, which is much less burdensome for advice related to IRA, 401(K) and other ERISA plans.  The problem for many advisers is that not only do trailing and 12b-1 fees disqualify them from the BICE Lite exemption, but the use of soft dollars and the receipt of solicitation fees will also move the adviser into full BICE compliance.  Full implementation of the DOL fiduciary rule is currently scheduled for January 1, 2018.  However, this date will be moved until July 1, 2019, if OMB approves the latest delay.

Two provisions of the DOL Fiduciary rule were effective June 9, 2017.  The first provision expands the definition of a fiduciary by including financial advisers to client retirement accounts (this does not really change the law as to investment advisors). The second provision establishes impartial conduct standards, including:

  • Any recommendation must be in the best interest of the investor, meaning that it must be based on the investor’s investment objectives, risk tolerance, and financial circumstances (and not financial considerations of the fiduciary);
  • A fiduciary must not make misleading statements about investment transactions, compensation, or conflicts of interest; and
  • A fiduciary may not charge more than a reasonable amount for services.

However, until the full rule is effective, investment advisers can still receive commissions, trailing, revenue sharing and other transaction based fees without complying with the BICE procedures.  Advisers may also take comfort from the fact that DOL has indicated that it will not enforce any parts of the DOL Fiduciary rule until January 1, 2018.

Written by:

Liskow & Lewis
Contact
more
less

Liskow & Lewis 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):
hide

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.

Security

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 info@jdsupra.com. 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: info@jdsupra.com.

- 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.