The Labor Department has outlined its approach to enforcement of the fiduciary regulation if the April 10 applicability date for the fiduciary regulation isn’t delayed (before April 10).
Noting that “financial institutions have expressed concern about investor confusion and other marketplace disruption based on uncertainty about whether a final rule implementing any delay will be published before April 10,” the Labor Department has issued Field Assistance Bulletin 2017-01, outlining a temporary enforcement policy. Specifically, that they (the DOL) will not initiate any enforcement action if a “gap period” results because a delay of the applicability date is not issued in advance of April 10th (the applicability date).
Moreover, even if the Labor Department does not issue a delay in the applicability date, the FAB indicates that they would give firms a reasonable opportunity to cure any failure to timely comply without enforcement, “provided that the adviser or financial institution satisfies the applicable conditions…including sending out required disclosures or other documents to retirement investors, within a reasonable period after the publication of a decision not to delay the April 10 applicability date.”
The FAB also notes that the Labor Department will treat the 30-day cure period (under Section IX(d)(2)(vi) of the BIC Exemption and Section VII(d)(2)(v) of the Principal Transactions Exemption) as being available to financial institutions that, as of the April 10 applicability date did not provide the required disclosure documents to retirement investors.
The Labor Department also indicated that “to the extent circumstances surrounding the decision on the proposed delay of the April 10 applicability date give rise to the need for other temporary relief, including prohibited transaction relief, EBSA would consider other steps as necessary.”
Earlier this month the Labor Department proposed to extend the applicability date of the fiduciary regulation by (a mere) 60 days – while taking 15 days to collect comments on that proposal (they have started coming in – see our report here). Additionally, with regard to President Trump’s Feb. 3 Executive Memorandum that directed the Labor Department to essentially reconsider the impact of the fiduciary regulation on investors, retirees, the industry, advice access, pricing and litigation, the Labor Department is (still) seeking comments for the next 45 days.
We understand that it is still the intent of DOL to issue some kind of delay (at least 60 days or maybe more) and to try and get out the guidance before April 10th, but there is some concern that something at the Office of Management and Budget (OMB) might hold it up, and so they issued this Field Assistance Bulletin as a precaution.