It is Increasingly Unlikely We Will Ever See Full Implementation of the DOL Fiduciary Duty Rule or the BICE

The DOL Rule’s application of a fiduciary standard to persons who make recommendations to retirement investors has been in effect since June 9, 2017. Since that time, it has become increasingly unlikely that full implementation of the Rule or the BICE will ever see the light of day.

On November 2, 2017, the DOL’s proposal to delay full implementation of the Rule and the BICE was posted by the OMB. The delay rule, which must be approved by the OMB, would delay full implementation of the DOL Rule and the BICE yet again, from January 1, 2018, until July 1, 2019. Insiders expect the  OMB to approve the delay rule quickly, perhaps in only a week or two. Assuming the OMB approves the delay rule, the DOL will be authorized to publish the final delay rule in the Federal Register and the newest delay will take effect.

Meanwhile, the full BICE’s prohibition on class action waivers was dealt another blow, when the United States District Court for the District of Minnesota preliminarily enjoined the DOL from implementing or enforcing the prohibition against Thrivent, in Thrivent Financial for Lutherans v. R. Alexander Acosta, Secretary of Labor and United States Department of Labor, Case No. 16-cv-3289 (D. Minn.). The Court’s decision, which will be the subject of a separate blog post, is here.

If full implementation of the DOL Fiduciary Rule and the BICE is delayed to July 1, 2019, that means that the transition versions of the Rule and the BICE will apply until June 30, 2019 (if not indefinitely). Under the transition versions:

  • Firms and advisers are fiduciaries to the extent they give investment advice to retirement investors; and
  • They are subject to the Impartial Conduct Standards, which require firms and advisers to:
    • Provide advice that is in the retirement investors’ best interest (i.e., recommendations that are prudent and loyal);
    • Charge no more than reasonable compensation; and
    • Make no misleading statements about investment transactions, compensation, and conflicts of interest.

The DOL has previously cautioned that it “expects financial institutions to adopt such policies and procedures as they reasonably conclude are necessary to ensure that advisers comply with the Impartial Conduct Standards.” DOL May 2017 Conflict of Interest FAQs at p. 5.

So, while firms and advisers may breathe a sigh of relief that the full DOL Rule and BICE (with their onerous written disclosure and investor communication obligations) look to be pushed back yet again, firms and advisers should remember that the transition period of the Rule and the BICE is still in force.

Accordingly, firms especially should have in effect:

  • Written policies and procedures acknowledging their status as fiduciaries to the extent they give investment advice to retirement investors; and
  • Written policies and procedures implementing the Best Interest standard and Impartial Conduct Standards.

Firms and advisers are also encouraged to ensure that their E&O policies cover breach of fiduciary duty claims and alleged violations of the DOL Rule.

About Julie Firestone

Julie Firestone is a member of Briggs and Morgan's Business Litigation Section and the Financial Markets Group. Julie practices primarily in the following areas: complex commercial disputes and class actions; securities litigation and arbitration; SEC and FINRA regulatory investigation and enforcement; and shareholder and partnership disputes. Julie represents corporations, investment firms, broker-dealers, insurance companies, issuers of securities, registered representatives and insurance agents in class actions, regulatory proceedings and other adversary matters. She also focuses on customer complaints and regulatory compliance, as well as customer disputes in arbitration. Julie’s legal experience includes matters involving securities fraud, breach of contract, common law fraud, RICO, breach of fiduciary duty, suitability, selling away and unauthorized trading.
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