United States

Portion of the Fiduciary Rule went into effect on June 9, 2017

COMPLIANCE NEWS  | 

The Department of Labor’s (DOL) Fiduciary Rule was implemented in a phased approach with the first phase having an effective date of June 9, 2017. The Fiduciary Rule treats persons who provide investment advice or recommendations for a fee or other compensation as fiduciaries in a wider array of advice relationships than was true of the prior regulatory definition. The Fiduciary Rule is limited to advice concerning investments in IRAs, ERISA-covered retirement plans and other plans covered by section 4975 of the Internal Revenue Code.

Initially, the applicability date for the first phase of the Fiduciary Rule implementation was scheduled to be effective on April 10, 2017; however, the DOL had delayed the rule for 60 days after the current administration ordered the DOL to conduct a review on whether the Fiduciary Rule should be revised or repealed. While there were no revisions to the rule during the 60-day delay, it is unclear what the rule might look like on Jan. 1, 2018, which is the full implementation date, as three lawsuits have been filed against the rule and the current administration is still reviewing the 1,023-page rule. The DOL also intends to issue a Request for Information that will ask for public comment on an additional delay to the Jan. 1, 2018, applicability date.

Although part of the rule is currently in effect, the DOL has stated it will not pursue claims against fiduciaries making good-faith efforts to comply with the rule. During the transition period, financial institutions and advisers must comply with the “impartial conduct standards” which are consumer protection standards that ensure that advisers adhere to fiduciary norms and basic standards of fair dealing. The standards specifically require advisers and financial institutions to give advice that is in the best interest of the investor, charge no more than reasonable compensation, and make no misleading statements about investment transactions, compensation and conflicts of interest.