DOL to delay remaining parts of fiduciary rule until July 2019
- The U.S. Department of Labor (DOL) revealed via a brief filed in a Minnesota lawsuit that it has submitted a proposal to delay the remaining parts of the fiduciary rule by 18 months, until July 1, 2019. "It's a very clear attempt at death by delay," one expert told Investment News.
- Two provisions of the rule already went into effect in June: the new definition of fiduciary and the new partial conduct standards. But they essentially went into effect with little threat of enforcement; DOL has said it won't go after any firms working in good faith to comply during the transitional phase.
- The delayed provisions include the best-interest-contract exemption (BICE), which dictates when a broker must sign a contract promising to put clients' interests first. An exemption affecting "principal transactions" also will be delayed.
When President Trump took office, many assumed that would be the end of the fiduciary rule. The rule has so far mostly survived — but this latest delay may bring it one step closer to its demise.
The drama began in February when Trump instructed DOL to review the rule to see if it needed any changes. Less than a week later, a federal judge upheld the legality of the rule, giving Trump's DOL fewer options to kill it.
But to comply with the order handed down in February, DOL instituted a 45-day delay to June 9. A few weeks before that impending effective date, Secretary Acosta publicly announced via an opinion piece in the Wall Street Journal that parts of the rule would not be delayed further and that June 9 would remain an applicable date for two provisions of the rule. But then, at the end of June, the agency released a Request for Information (RFI) asking stakeholders to weigh in on the effective dates — and on the status of parts of the rule already in effect. This week's extended delay was announced right at the end of the RFI comment period.
In the background, Congress has been trying to pass a Dodd-Frank repeal that would render much of this issue moot, but both the House and the Senate had been too embroiled in healthcare and tax reform to make any real headway on the issue.
Now the future of the rule seems shakier than ever, as experts say the lengthy delay will allow the Securities and Exchange Commission to weigh in and DOL to draft new regulations that may simplify the rule overall. In the meantime, HR should continue closely vetting plan vendors and financial advisers to ensure they're at least in compliance with the provisions that have already taken effect.
- Investment News DOL seeks to delay fiduciary rule until July 2019
- Morning Star What's Happened and What's Next for the Fiduciary Rule
- DOL Notice of Administrative Action
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