10 Trade Groups Ask to Extend Fiduciary Non-Enforcement Policy

PTE 2020-02

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Ten interested stakeholders, mainly financial services trade groups and a law firm representing a group of clients sent a letter last week to the Department of Labor (DOL) requesting more time to prepare for the implementation of PTE 2020-02.

The rule was adopted late last year and allowed to go into effect by the Biden administration this past February.

After the Fifth Circuit vacated the 2016 DOL fiduciary rule, DOL adopted a temporary enforcement policy related to the fiduciary obligations of financial professionals, and many firms are relying on that policy while they worked diligently to meet the requirements of PTE 2020-02.

The policy is set to expire on December 20, however, meaning firms and financial professionals will have to be ready to comply with the new PTE by that date, but more time is needed to achieve full compliance.

The letter asks that EBSA pause plans to propose further changes to the rules for investment advice fiduciaries until there is sufficient evidence that further changes are needed.

The groups further request that if the agency does go forward with a new proposal, the temporary enforcement policy should stay in place for a reasonable period of time after that rulemaking is completed.

They based the letter on three key points

First, although some firms may be technically able to comply by December 20, the letter states “it is important for financial institutions to be confident that their efforts preparing for implementation and compliance will be smooth and secure. This is achieved by having the time to refine and test their compliance tools and mechanisms.”

Second, the groups are concerned that many small firms may have been less aware of the December 20 expiration of the temporary enforcement policy than larger firms. For the larger firms, this has been an ongoing effort that in many cases began months ago by devoting substantial resources toward compliance. Such resources are not readily available to small firms.

Third, the letter writers claim “to continue to hear concerns from firms that are very hesitant to accept fiduciary status or firm up new procedures until they have an idea of how PTE 2020-02 and the other exemptions may be enhanced or modified, as reflected in the upcoming proposed guidance and further fiduciary rulemaking. The timing of any new proposals or guidance by EBSA creates significant uncertainty and challenges for the industry.”

The groups that signed the letter are:

American Securities Association (ASA)

Davis & Harman LLP1

Federation of Americans for Consumer Choice (FACC)

Finseca

Institute for Portfolio Alternatives (IPA)

Insured Retirement Institute (IRI)

Investment Company Institute (ICI)

National Association of Independent Life Brokerage Agencies (NAILBA)

National Association of Insurance and Financial Advisors (NAIFA)

Securities Industry and Financial Markets Association (SIFMA)

U.S. Chamber of Commerce

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