The Department of Labor ( DOL ) says it will not delay its implementation of the June 9 compliance date for its controversial fiduciary rule, but that it will nonetheless seek additional public input on the regulation.
Rejecting calls for a complete delay of the rule’s implementation, the DOL said that along with the partial implementation on June 9, full implementation remains slated for Jan. 1, 2018. “As a result, on June 9, 2017, investment advice providers to retirement savers will become fiduciaries, and the ‘impartial conduct standards’ will become requirements of the exemptions,” read a frequently-asked-questions (FAQ) notice that the DOL posted on its website, dated Monday.
In addition, Secretary of Labor Alexander Acosta spelled out the DOL’s plan and his thinking in a Wall Street Journal op-ed article.
Acosta summarized criticism of the new rule: “The rule’s critics say it would limit choice of investment advice, limit freedom of contract and enforce these limits through new legal remedies that would likely be a boon to trial attorneys at the expense of investors.”
The secretary said he felt implementation was necessary nevertheless. “We have carefully considered the record in this case, and the requirements of the Administrative Procedure Act, and have found no principled legal basis to change the June 9 date while we seek public input.”
In its FAQ, the DOL said, “(It) is possible, based on the results of the examination, that additional changes will be proposed.”
The DOL added, “Many of the most promising responses to the fiduciary rule, such as brokers’ possible use of ‘clean shares’ in the mutual fund market to mitigate conflicts of interest, are likely to take significantly more time to implement than what the department envisioned when it set Jan. 1, 2018, as the applicability date for full compliance with all of the exemptions’ conditions. By granting additional time, and perhaps creating a new streamlined exemption based upon the use of clean shares and other innovations for example, it may be possible for firms to create a compliance mechanism that is less costly and more effective than the sorts of interim measures that they might otherwise use.”
The rule – also known as the conflict-of-interest rule – will require brokers and advisors to recommend investments that are in the best interests of clients, not merely suitable for them, when they give retirement account advice. That is how fiduciaries are obligated to act. As a result, the new rule would require brokers and advisors to put their clients’ best interests before their own profit.
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