No more delays for the DOL fiduciary rule

Part of Invesco’s Legislative Insights series

No more delays for the DOL fiduciary rule

Jon VoglerDepartment of Labor (DOL) Secretary Alexander Acosta announced in a Wall Street Journal op-ed last week that the initial implementation date of the fiduciary rule will not be extended beyond June 9.

Mr. Acosta’s decision is a victory for supporters of the rule, which will require financial advisors to act in the best interests of their clients in retirement accounts. The rule had been delayed already, as it was previously scheduled for initial implementation by April 10.

Public comment on the rule will continue as the implementation date nears

Implementation of the rule is taking place in phases. On June 9, two basic provisions will become applicable:

  • The first expands the scope of advisors who must act as fiduciaries.
  • The other establishes impartial conduct standards. Under this provision, an advisor’s recommendations to retirement plans, those plans’ participants and IRAs have to be prudent and loyal (the “best interest” standard of care). The advisor cannot mislead a retirement investor, and the advisor’s and supervisory entity’s compensation must be reasonable.

At the same time, public comment on the rule will continue. In the May 23 op-ed, Mr. Acosta wrote “We have carefully considered the record in this case, and the requirements of the Administrative Procedure Act, and have found no principled legal basis to change the June 9 date while we seek public input.” He further explained that “Respect for the rule of law leads us to the conclusion that this date cannot be postponed. Trust in Americans’ ability to decide what is best for them and their families leads us to the conclusion that we should seek public comment on how to revise this rule.”

Further changes could be in store

The additional public comment is being sought in conjunction with the reevaluation of the rule that President Donald Trump ordered in February. That review by the DOL could potentially lead to significant changes in the regulation. Rule opponents — who have argued that the rule would restrict low- and moderate-income retirement investors’ access to advice and limit retirees’ investment choices by forcing advisors to steer them to low-risk options — had wanted the entire rule delayed during the DOL’s review, which is likely to last until the rule’s final implementation date of Jan. 1, 2018.

Could the SEC become more involved?

Mr. Acosta expressed his hope that the Securities and Exchange Commission (SEC) may be more involved in the process in the future. Many critics of the current rule have argued that it does not fall within the purview of the DOL and should be taken up by the SEC.

The Investment Company Institute (ICI) expressed disappointment with the DOL’s decision not to further delay implementation of the fiduciary rule beyond June 9, adding “We urge the department to advance its substantive reconsideration of the rule as quickly as possible and ICI stands ready to provide the DOL with analysis and perspective from the fund industry to inform that process. Additionally, we continue to strongly encourage the DOL to coordinate with the SEC to achieve a harmonized best interest standard that applies across retirement and nonretirement accounts and ensures that all investors have affordable access to financial advice.”

DOL offers assurance and guidance to fiduciaries during the transition

On a related note, late on May 22, the DOL announced in Field Assistance Bulletin No. 2017-02 that during the phased implementation period from June 9, 2017, to Jan. 1, 2018, it “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.”

Concurrently, the DOL published a new set of Frequently Asked Questions (FAQs) about the fiduciary regulation that focuses on this transition period.

We’ll keep you posted as this process continues.

Important information

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Jon Vogler
Senior Analyst
Retirement Research, Invesco Consulting

Senior Analyst Jon Vogler draws on extensive pension expertise to offer retirement thought leadership for Invesco. In addition to writing Invesco’s Retirement blog, he tracks legislative and regulatory developments and contributes as a writer and editor to a variety of retirement-related Invesco communications.

Prior to joining Invesco in 2008, Jon spent more than 25 years in the research, writing, compliance and underwriting areas of the retirement services industry, including roles as a senior consultant at Mutual Benefit Life’s pension consulting firm and as a compliance manager in the Automatic Data Processing retirement services division.

Jon earned the Fellow, Life Management Institute (FLMI) and Competent Toastmaster (CTM) designations. He has a B.A. in History from Rutgers, The State University of New Jersey.

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