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Tuesday, March 21, 2017

Pen Marking Days on a CalendarThe Department of Labor (DOL) released Field Assistance Bulletin 2017-01 on March 10, 2017, which outlines a temporary enforcement policy related to its final fiduciary rule.

Background

On February 3, 2017, President Trump directed the DOL to re-examine the final rule’s impact. As a result, on March 2, 2017, the DOL opened a 15-day comment period (which ended last Friday) on a proposed 60-day delay of the rule’s effective date, from April 10, 2017 to June 9, 2017.

Simultaneously, the DOL opened a 45-day comment period on the substance of the actual rule. This second comment period affords the DOL with an opportunity to review comments before June 9, 2017 (the proposed delayed effective date). At such point, the DOL could allow the final rule to take effect, propose an additional extension in order make amendments to the rule based on the comments received or withdraw the rule.

With the final rule’s current effective date quickly approaching and no indication on whether a delay would occur, there was growing uncertainty among members of the retirement services industry about how to proceed. For example, if the DOL doesn’t announce its decision to delay implementation of the rule until after April 10, 2017, a “gap” would exist between April 10, 2017 and the date the DOL actually issues the final rule delaying the implementation.  The other issue is that with entities ceasing their compliance efforts in anticipation of a delay it is highly unlikely such entities will be able to comply with the rule by April 10, 2017, if the delay does not occur.

Temporary Relief

The DOL issued Field Assistance Bulletin 2017-01 to assuage the above concerns. Pursuant to the Bulletin, the DOL will not take enforcement action against an adviser or financial institution during the “gap” period.  In addition, in the absence of a delay in the final rule’s effective date, the DOL will refrain from initiating enforcement actions provided the adviser or financial institution complies with the final rule, including sending out required disclosures to retirement investors, within “a reasonable period” after the publication of a decision not to delay the effective date.

So breathe easy for the moment, but recognize this development relates to a delay, and not repeal, of the final rule.

For additional insight and perspective, read this client alert from our broker-dealer practice.

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