On the same day Labor Secretary Acosta said there’s no legal basis for delaying the fiduciary rule’s implementation date of June 9, the Department of Labor said it will not actually enforce the fiduciary rule until January 1, 2018, as long as fiduciaries “are acting in good faith.”
The latter announcement was billed as “relief” and came in the form of a Field Assistance Bulletin on Monday, detailing a grace period of sorts to allow for additional comments and for firms to continue to adjust.
“…during the phased implementation period ending on January 1, 2018, 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.”
The bulletin came just hours after Acosta, writing in The Wall Street Journal, argued that, “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. 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.”
He added that “The rule’s critics say it would limit choice of investment advice, limit freedom of contract, and enforce these limits through new legal remedies that would likely be a boon to trial attorneys at the expense of investors.
“Certainly, it is important to ensure that savers and retirees receive prudent investment advice,” he concedes, and noted “but doing so in a way that limits choice and benefits lawyers is not what this administration envisions.
Tellingly, the language employed in the bulletin leaves the department open for future flexibility on the rule, noting, “to the extent that circumstances surrounding the applicability date of the fiduciary duty rule and exemptions give rise to the need for other temporary relief, EBSA will consider taking such additional steps as necessary.”
The DOL said it is “actively engaging in a careful analysis of the issues raised in the President’s Memorandum. It is possible, based on the results of the examination, that additional changes will be proposed to the fiduciary duty rule and PTEs.”
The Department also intends to issue a Request for Information (RFI) in the near future seeking additional public input on specific ideas for possible new exemptions or regulatory changes based on recent public comments and market developments.
“The Department is also aware that after the fiduciary duty rule and PTEs were issued firms have begun to develop new business models and innovative market products to mitigate conflicts of interest,” it added before continuing in a very long run-on sentence:
“The RFI will specifically ask for public comment on whether it is likely to take more time to implement these new approaches than what the Department envisioned when it set January 1, 2018, as the applicability date for full compliance with all of the exemptions’ conditions, and, if so, whether an additional delay in the January 1, 2018 applicability date would reduce burdens on financial services providers and benefit retirement investors by allowing for a smoother implementation of those market changes.”
Although the department has a “statutory responsibility and broad authority to investigate or audit employee benefit plans and plan fiduciaries to ensure compliance with the law,” compliance assistance for plan fiduciaries and other service providers is also a high priority for the Department,” it said by way of explanation.
“The Department has repeatedly said that its general approach to implementation 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.”
Consistent with that approach, the department has determined that temporary enforcement relief is appropriate and in the interest of plans, plan fiduciaries, plan participants and beneficiaries, IRAs, and IRA owners.
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
Yet another about face by an administration who has betrayed the vast majority of its backers. The more things change – the more they stay the same.