Fiduciary Rule Takes Effect Tomorrow

By:
June 8, 2017

By: Jennifer Webb

Starting tomorrow, Friday, June 9, the Department of Labor (DOL) fiduciary rule will take effect, and those who provide investment advice to retirement savers will become fiduciaries.

“Impartial conduct standards” in the DOL rule will take effect as of tomorrow. The rule transitions to full applicability on Jan. 1, 2018.

During the transition period, financial institutions and advisers must comply with the “impartial conduct standards,” which require advisers and financial institutions to:

Give advice that is in the “best interest” of the retirement investor.
Charge no more than reasonable compensation.
Make no misleading statements about investment transactions, compensation and conflicts of interest.

The DOL issued FAQs and a temporary enforcement policy to help advisers understand the requirements that apply during the transition period. Absent additional action from the DOL, the transition period ends Jan. 1, 2018, and full compliance with the fiduciary rule is required for firms and advisers.

As the fiduciary rule begins to take effect, the DOL continues to conduct its ongoing examination of the rule as directed by President Trump in early February. The President’s order directed the DOL to review the rule to “determine whether it may adversely affect the ability of Americans to gain access to retirement information and financial advice.”

Pursuant to the President’s memorandum, the DOL sought public comments in April. In response, the Big “I” submitted a letter suggesting that the DOL update the economic impact analysis on the rule to take into account the value of personalized retirement advice. The association’s letter also recommended changes to the rule such as broader education, as well as referral and marketing exemptions.

Meanwhile, the Securities and Exchange Commissions is seeking public comments from interested parties ahead of potential rulemaking on standards of conduct for investment advisers and broker-dealers.

Jennifer Webb is Big “I” federal government affairs counsel.