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Department of Labor to Propose 18-Month Delay in Applicability Date for Portions of Fiduciary Rule

On August 9, 2017, the U.S. Department of Labor (the “DOL”) filed a notice in connection with pending litigation that revealed a portion of its current plans for the fiduciary rule. In the filing, the DOL stated that it has submitted to the Office of Management and Budget (OMB) proposed amendments to the Best Interest Contract Exemption and other exemptions that would effectively delay the applicability date of many of the requirements for fiduciaries to comply with the fiduciary rule until July 1, 2019. If the proposed amendments emerge from the OMB review process unchanged, then this would permit financial institutions to maintain their transition-period compliance practices for the time being, without an immediate need to move forward with resource-intensive plans to comply with the documentary, disclosure, and technological requirements included in the full BIC exemption. If the applicability date for the full requirements under the exemptions is not delayed, then full compliance would be required by January 1, 2018, which would require institutions to devote significant resources to their further compliance efforts in the near term. It is unclear whether the DOL’s moratorium on enforcement efforts will be extended during this additional 18-month period. Ropes & Gray will continue to monitor any developments regarding the fiduciary rule, including this proposed delay.

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Department of Labor Proposes 18-Month Delay in Applicability Date for Portions of Fiduciary Rule

Practices: ERISA

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On August 31, 2017, the U.S. Department of Labor (the “DOL”) published proposed amendments to the Best Interest Contract Exemption and other exemptions that would delay the applicability date of many of the requirements for fiduciaries to comply with the fiduciary rule from January 1, 2018 until July 1, 2019. In the release, the DOL stated that the delay is primarily intended to give it more time to consider possible changes or alternatives to the rule and exemptions, and to coordinate with the SEC on any changes. The proposal also indicates that the DOL plans to release, in the near future, a new, “more streamlined” exemption based on new developments in the financial services industry. Comments are requested on the length and format of the delay (comments are due within 15 days of publication).

The DOL also released a new Field Assistance Bulletin (2017-03) outlining a non-enforcement policy for fiduciaries who rely on the BIC exemption and related exemptions but who require IRA owners to waive their right to bring or participate in a class action or other representative action in court. Notably, this non-enforcement policy does not alter or limit any other rights of action that IRA owners may have, including (as the DOL emphasizes) individual rights to enforce contractual provisions under state law.

Taken together, these releases from the DOL should give financial institutions that are currently relying on the BIC exemption greater certainty about their compliance obligations while the DOL works to revise the long-term requirements for relief. These releases may also make the BIC exemption more attractive to institutions that were considering making use of it but that were concerned about additional costs and compliance efforts following the end of the year.

For details on the requirements of the fiduciary rule, see our prior Alert on Key Considerations for Asset Managers. Further information on the rule can be found in our Alert on the Final Rule and our Alert on the Final Delay, and for details on the DOL FAQs, see our prior Alert on the First FAQ, Alert on the Second FAQ, and Alert on the Transition Period FAQs.

If you would like to discuss the impact that the fiduciary rule may have on any aspect of your business, or if you have any other questions about the rule, please feel free to reach out to any of the attorneys listed below.

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