'Will Time Derail 'Fiduciary' Delay's Arrival? DOL FABulously Pledges to 'Mind the Gap' on Enforcement'

Author:Mr Steven Rabitz
Profession:Stroock & Stroock & Lavan LLP


On Friday, March 10, the Department of Labor ("DOL" or "Department") issued Field Advice Bulletin 2017-01 ("FAB 2017-01") to address concerns in the financial services and employee benefits community about the timing of the Department's proposed 60-day delay of its "fiduciary" rule and its related exemptions. Without any delay, the rule is scheduled to become applicable (in part) beginning April 10, 2017. 

As described in our Stroock Special Bulletin "It's About Time! DOL Proposes Delay of Fiduciary Rule,"1 because of the March 2 timing of the proposal for delay and the March 17 scheduled end of the comment period, many market participants had cause for confusion. In this regard, FAB 2017-01 notes that:

Although the Department intends to issue a decision on the March 2 proposal in advance of the April 10 applicability date, financial services institutions have expressed concern about investor confusion and other marketplace disruption based on uncertainty about whether a final rule implementing any delay will be published before April 10, whether there may be a "gap" period during which the fiduciary duty rule becomes applicable before a delay is published after April 10, or whether the Department may decide either before or after April 10 not to issue a delay based on its evaluation of the public comments.

The FAB continues:

For example, the Department understands that many financial services firms and advisers are concerned that, if the Department decides not to issue a delay, there may not be sufficient time to provide retirement investors before the April 10 applicability date with disclosures or other documents intended to comply with the transition period relief in the BIC Exemption, the independent fiduciary exception in the rule, or other disclosure provisions of the rule or the [Prohibited Transaction Exemptions] PTEs. The Department notes further:

Moreover, we understand that in order to comply with the BIC Exemption in the unlikely event of a "gap" period or if the Department decides not to issue a delay, some financial services firms and advisers are considering distributing communications to existing retirement investor clients and potential plan and IRA customers that, among other things, include language regarding an uncertain applicability date and conditional acknowledgements of fiduciary status, i.e., that the firm will be a fiduciary but only if the rule becomes applicable. Although such conditional communications would...

To continue reading