Last week, the Department of Labor (DOL) announced a temporary enforcement policy related to its recently proposed 60-day delay of the April 10, 2017 applicability date of its fiduciary conflict-of-interest rule and related prohibited transaction exemptions. The DOL indicates that although it believes it will issue a decision on the proposal before the April 10 applicability date, it has nonetheless determined that temporary enforcement relief is appropriate to protect against potential investor confusion and related marketplace disruptions.

A copy of the guidance can be obtained here.

Background

In early March, the DOL proposed a 60-day delay of the April 10, 2017 applicability date of its fiduciary conflict-of-interest rule and related prohibited transaction exemptions (PTEs). The delay was announced not long after President Trump issued a memorandum directing the Secretary of Labor to review the rule to determine whether it adversely affects the ability of Americans to gain access to retirement information and financial advice. See here for our WorkCite article on the proposed 60-day applicability date delay.

Last week, in Field Assistance Bulletin No. 2017-01 (the FAB), the DOL announced a temporary enforcement policy related to the DOL’s 60-day delay proposal. The FAB indicates that the DOL does believe it will issue a decision on its proposal before the April 10 applicability date. It nonetheless determined that temporary enforcement relief is appropriate to protect against investor confusion and related marketplace disruptions relating to uncertainty as to the timing of its decision on whether to delay the applicability date of the rule and PTEs, especially given that there may be a “gap” period during which the rule and PTEs become applicable before a delay is published after April 10. The DOL stated in the FAB that it:

“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 [Best Interest Contract (BIC)] Exemption, the independent fiduciary exception in the rule, or other disclosure provisions.”

Temporary Enforcement Policy

In light of the DOL’s stated commitment to provide compliance assistance to affected parties, it has issued the following temporary enforcement policy.

  • If the DOL delays the applicability date of the rule and PTEs after April 10

If the DOL issues a final rule after April 10 that provides for a delay in the applicability date of the rule and PTEs, the DOL will not initiate an enforcement action because an adviser or financial institution did not satisfy conditions of the rule or PTEs during the “gap” period in which the rule becomes applicable before a delay is implemented. The FAB states that this includes a failure to provide retirement investors with disclosures or other documents intended to comply with provisions of the rule or related PTEs (e.g., BIC Exemption disclosures).

  • If the DOL does not issue a delay in the rule and PTEs

If the DOL decides not to issue a delay, the DOL will not initiate an enforcement action because an adviser or financial institution, as of the April 10 applicability date, failed to satisfy conditions of the rule or PTEs provided that the adviser or financial institution satisfies the applicable conditions of the rule or PTEs, including sending out required disclosures or other documents to retirement investors, within a reasonable period after the publication of a decision not to delay the April 10 applicability date. The DOL will also treat the 30-day cure period under the BIC Exemption and Principal Transactions Exemption as available to financial institutions that, as of the April 10 applicability date, did not provide to retirement investors the disclosures or other documents described in such exemptions.

The FAB states that additional temporary relief, including prohibited transaction relief, may be forthcoming if the DOL determines that circumstances surrounding its decision on the proposed delay of the April 10 applicability date give rise to the need for additional relief.