Earlier this year, President Donald Trump requested that the Department of Labor reexamine the pending Fiduciary Rule. In response, DOL has just issued Field Assistance Bulletin (FAB) 2017-02, together with an additional set of FAQs outlining a temporary enforcement policy on the Fiduciary Rule.
- As a reminder, DOL's long-debated and pending Fiduciary Rule impacts a variety of entities that provide investment advice or market investment products to benefit plans governed by ERISA; individual retirement accounts (IRAs); health savings accounts; Archer MSAs; and Coverdell education savings accounts.
- The Fiduciary Rule expands the definition of fiduciary to encompass those who give "investment advice" about the advisability of an investment directed to a specific recipient that reasonably might be viewed as a suggestion to take (or refrain from taking) a particular course of action.
In FAB 2017-02, DOL notes that it "is actively engaging in a careful analysis of the issues raised in the President's Memorandum," and that "[i]t is possible, based on the results of the examination, that additional changes will be proposed to the fiduciary rule and PTEs." Meanwhile, the Fiduciary Rule will take effect on June 9, 2017, but with enforcement of certain portions delayed until January 1, 2018.
During the transition period from June 9, 2017, until January 1, 2018, DOL's approach "will be marked by an emphasis on assisting (rather than citing violations and imposing penalties on) plans, plan fiduciaries, financial institutions, and others who are working diligently and in good faith to understand and come into compliance with the fiduciary duty rule and exemptions."
DOL also issued a set of 15 FAQs which explain that − during this transition period − institutions can engage in a variety of transactions through compliance with the "Impartial Conduct Standards" of the Best Interests Contract Exemption or the Principal Transactions Exemption which generally requires that investment advice fiduciaries:
- Give advice that is in the retirement investor's best interest (i.e., prudent advice that is based on the investment objectives, risk tolerance, financial circumstances, and needs of the retirement investor, without regard to financial or other interests of the adviser, financial institution, or their affiliates, related entities or other parties)
- Charge no more than reasonable compensation and
- Make no misleading statements about investment transactions, compensation and conflicts of interest.
Absent further regulatory changes (which, as noted, DOL is still considering based on the President's Memorandum), full compliance will be required on and after January 1, 2018. Until then, financial institutions and advisors must work "diligently and in good faith" to comply with the impartial conduct standards of the Fiduciary Rule.