The Department of Labor has announced that the new fiduciary conflict of interest rule and related exemptions will begin taking effect on June 9, 2017, ending speculation of further delay. At the same time, the Department announced a relaxed enforcement standard for the rest of 2017. See our blog post on the delayed effective date here.

The effect of the Department’s announcement is that the new standard for when communications rise to the level of fiduciary advice will go into effect at 11:59 p.m. on June 9th. After that time, service providers who are deemed to provide investment advice—for example, by suggesting a particular investment or strategy, or recommending a rollover—will be subject to ERISA’s duties of prudence and loyalty, as well as ERISA’s prohibited transaction rules.

This is the first time that ERISA’s requirements of prudence and loyalty will expressly apply for advisers to IRAs, HSAs, and other non-ERISA accounts that are subject to the prohibited transaction rules under the Internal Revenue Code. At least for now, however, there will continue to be no private right of action against advisers to non-ERISA accounts for breach of the duty of prudence or loyalty. The consequence of non-compliance will be a self-reporting excise tax under Section 4975 of the Internal Revenue Code.

Between now and the end of the year, the Department will continue to review the fiduciary rule and related exemptions. The Department announced that it intends to publish a Request For Information and that it will be receptive to comments related to the new rule’s requirements. Secretary Acosta has also indicated (in a Wall Street Journal op-ed) that the Department is hoping to collaborate with the Securities and Exchange Commission on a more uniform standard.

Through the end of the year, the Department “will not pursue claims against fiduciaries who are working diligently and in good faith to comply with the fiduciary duty rule and exemptions, or treat those fiduciaries as being in violation of the fiduciary duty rule and exemptions.” This relaxed approach to enforcement is consistent with the Department’s emphasis on compliance rather than penalties.