Following the proposed rule to delay the Department of Labor’s Conflicts of Interest Rule (the “DOL Rule), John Canary, the DOL’s Director of Regulations and Interpretations, issued a Field Assistance Bulletin announcing a temporary enforcement policy. This memorandum, which was sent to the Director of Enforcement and Regional Directors, was created to help ease concerns that compliance professionals may have regarding the fiduciary rule while the agency reviews the rule and determines whether or not to delay it.
In the Bulletin, Mr. Canary outlined some concerns expressed by those in the industry, including whether:
- Investor confusion and marketplace disruptions;
- There will be a “gap” period during which the fiduciary duty rule becomes applicable before a delay is published; and
- The Department may decide either before or after April 10 not to issue a delay based on its evaluation of the public comments.
Last but not least, the financial industry is concerned that advisors won’t be able to comply with the disclosure and document requirements under the Best Interest Contract Exemption or other requirements of the DOL Rule if the DOL decides not to issue a delay in the compliance date.
In response to these concerns, the DOL is adopting the following temporary enforcement policy:
- In the event the Department issues a final rule after April 10 implementing a delay in the applicability date of the fiduciary duty rule and related PTEs, the Department will not initiate an enforcement action because an adviser or financial institution did not satisfy conditions of the rule or the PTEs during the “gap” period in which the rule becomes applicable before a delay is implemented, including a failure to provide retirement investors with disclosures or other documents intended to comply with provisions of the rule or the related PTEs.
- In the event the Department decides not to issue a delay in the fiduciary duty rule and related PTEs, the Department will not initiate an enforcement action because an adviser or financial institution, as of the April 10 applicability date of the rule, failed to satisfy conditions of the rule or the PTEs provided that the adviser or financial institution satisfies the applicable conditions of the rule or PTEs, 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.”
While this temporary relief from potential enforcement is important, firms that are affected by the DOL Rule should ensure they will be able to comply with the rule’s requirements within the relief period should it become effective on April 10th.
For information on how CCLS can help investment advisers and broker-dealers maintain compliance with the DOL Rule, please contact us at firstname.lastname@example.org or (619) 278-0020.