DOL Kicks Off New Fiduciary Rule Comment Period
June 30, 2017 by Joe Morris
The Labor Department is launching a new call for comment on the fiduciary rule, raising the prospect of a further implementation delay and further potential changes to when and how the controversial best interest contracts must be used, reports Ignites.
Commenters will have 15 days to weigh in on extending the Jan. 1 deadline by which firms are expected to fully adhere to the rule, including using the best interest contract exemption. The initial implementation deadline, which has already been pushed back, had been April 10.
Parts of the rule began taking effect this month, albeit without full DOL enforcement. But the best interest exemption ranks among the rule’s most controversial provisions. It requires advisors who sell products to retirement clients on a commission basis to sign a contract with those clients disclosing potential conflicts of interest.
A second comment period, to last 30 days, will solicit input on “possible additional exemption approaches or changes.”
The clock begins ticking on both comment periods once the DOL’s requests are published in the Federal Register, likely sometime next week.
Noting that prior public comment on the rule has suggested the possibility of devising “new and more streamlined exemptions and compliance mechanisms,” the request urges commenters to elaborate.
“The department is particularly interested in public input on whether it would be appropriate to adopt an additional more streamlined exemption or other rule change for advisers committed to taking new approaches … based on the potential for reducing conflicts of interest and increasing transparency,” the DOL says.
The request strongly suggests the DOL would be amenable to giving firms more time to develop mutual fund clean shares in response to prior public comment seeking such a reprieve.
“If commenters believe more time would be necessary to build the necessary distribution and compliance structures for such innovations, the department is interested in information related to the amount of time expected to be required,” the document reads.
The DOL also raises the possibility of “substantially altering” or even waiving the requirement that the best interest contract be used with IRA accounts. The DOL asks about “the likely impact on advisers’ and firms’ compliance incentives” if it were to do so? “What should be changed?” it also asks.
Other questions raised in the request include whether to try to simplify the best interest contract exemption disclosure requirements, whether to exclude recommendations to make or increase IRA contributions from the definition of investment advice and how the DOL might revise or expand the rule’s principal transaction exemption, which provides relief for investments such as debt securities, CDs and unit investment trusts to be sold to plans and IRAs in principal transactions and risk-free principal transactions.
The DOL signaled its intention to initiate the comment period earlier this month when announcing, via a White House Office of Management and Budget notification, that it planned to solicit information from the public on revising the rule.