On June 29, 2017, the Department of Labor (DOL) announced another round of public comment on its fiduciary rule—this time in the form of a Request for Information (RFI). The DOL’s Final Fiduciary Rule was published on April 8, 2016, and became applicable on June 9, 2017.
The RFI seeks input on (a) whether to extend the January 1, 2018, applicability date for parts of the rule that are not yet in effect, and (b) changes to make the rule more workable. The RFI expresses an openness to modifying existing exemptions and adopting new ones. The RFI has two deadlines for submitting comments: 15 days for comments on whether to extend the January 1, 2018, applicability date, and 30 days for other comments. The days are to be counted from when the RFI was published in the Federal Register, which occurred on July 6th. The RFI poses two sets of questions. The first set of questions asks whether an extension of the applicability date beyond January 1, 2018, for full implementation of the Best Interest Contract (BIC) Exemption and Principal Transaction Exemptions would reduce burdens on financial service providers and benefit retirement investors by allowing a more efficient implementation, or whether such a delay would carry any risk.
The RFI has 18 specific questions, all of which are aimed at collecting more information for the DOL’s review of whether and how the fiduciary rule affects retirement investors. The DOL appears to be committed to consumer protection, yet open to constructive feedback regarding its exemptions.
A sample of the questions in the RFI include:
- What actions have already been implemented by the regulated community in order to comply with the Fiduciary Rule and related exemptions, and are there are any market innovations the DOL should consider?
- Whether the Fiduciary Rule and related exemptions appropriately balance the interests of consumers while protecting them from conflicts of interest, and effectively allow a wide range of products to meet the needs of investors?
- To what extent the costs of the exemption conditions exceed their benefits, and whether there are better approaches?
- What are the likely implications of eliminating or substantially revising the contract and warranty requirements currently included in the BIC and Principal Transaction Exemptions?
- Would mutual fund “clean” shares allow financial institutions to develop policies and procedures that avoid compensation incentives to favor one mutual fund over another? What are the legal and practical impediments financial institutions face in adding clean shares to their product offerings?
- How would advisers be compensated for selling fee-based annuities?
- Are there innovations other than clean shares, T-shares and fee-based annuities that hold similar potential to mitigate conflicts and increase transparency?
- Should the DOL base a streamlined exemption on a model set of policies and procedures?
- Could a streamlined exemption or other changes be developed for advisers who comply with any updated standards of conduct adopted by the Securities and Exchange Commission?
- Whether the Principal Transaction Exemption could be improved to better serve investor interests and provide flexibility?
- How could the BIC Exemption disclosures be simplified? Should the DOL develop model disclosure provisions?
- Should recommendations to make or increase contributions to a plan or IRA be expressly excluded from the definition of investment advice?
Questions about California’s Fiduciary Laws and Exemptions?
Employers and employees in California with questions about fiduciary rules or investment advisors, should not hesitate to contact an employment lawyer. If you are living in Los Angeles, San Francisco, Sacramento, or San Diego and you have such questions, contact Kingsley & Kingsley to speak with one of our experienced lawyers.
Kingsley & Kingsley
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Encino, California 91436
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