An 18-month extension of the transition period for the Prohibited Transaction Exemption (PTE) amendments and applicability dates for the Department of Labor’s fiduciary rule has been finalized.
The special transition period under sections II and IX of the Best Interest Contract Exemption (PTE 2016-01) and section VII of the Class Exemption for Principal Transactions in Certain Assets between Investment Advice Fiduciaries and Employee Benefit Plans and IRAs (PTE 2016-02) is extended to July 1, 2019, rather than ending on Jan. 1, 2018.
In addition, the announcement delays the applicability of certain amendments to Prohibited Transaction Exemption 84-24 for the same period.
An advance copy of the extension was released on Nov. 27 by the Department of Labor’s Employee Benefits Security Administration. The final version was published in the Federal Register on Nov. 29, at 82 FR 56545.
DOL explains that the extension will give it the time necessary to consider public comments based on the criteria in President Trump’s Feb. 3, 2017, memorandum instructing the agency to prepare an updated analysis of the likely impact of the fiduciary rule on access to retirement information and financial advice, and review whether possible changes to these exemptions would be appropriate.
Moreover, the DOL notes that it is granting the delay because of its concern that without a delay, consumers may face significant confusion and regulated parties may incur undue expense to comply with conditions or requirements that ultimately may be revised or repealed.
“Whether, and to what extent, there will be changes to the Fiduciary Rule and PTEs as a result of this reexamination is unknown until its completion,” the announcement further states. In addition, the DOL said it anticipates proposing a new streamlined class exemption in the near future.
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The DOL also reminds industry stakeholders that the Impartial Conduct Standards became applicable on June 9, 2017, and advises that the same rules and standards will remain in effect throughout the extended transition period. In general, this means that “financial institutions and advisers must continue to give prudent advice that is in retirement investors’ best interest, charge no more than reasonable compensation, and avoid misleading statements,” the DOL says.
Temporary Enforcement Policy Extended
The announcement also extends a temporary enforcement policy (Field Assistance Bulletin 2017-02, May 22, 2017) covering the transition period to July 1, 2019, during which the DOL will not pursue claims against investment advice fiduciaries who are working diligently and in good faith to comply with their fiduciary duties and to meet the conditions of the PTEs or treat those fiduciaries as being in violation of the fiduciary rule and PTEs.
The DOL explains that, consistent with the approach to provide compliance assistance, it believes the extended temporary enforcement relief is appropriate. The agency further advises, however, that as it reviews the compliance efforts of firms and advisers during the transition period, it will focus on the affirmative steps that firms have taken to comply with the Impartial Conduct Standards and to reduce the scope and severity of conflicts of interest that could lead to violations of those standards.