Both the Insured Retirement Institute (IRI) and the American Council of Life Insurers (ACLI) applauded the Department of Labor’s decision Monday to delay provisions of the fiduciary regulation for 18 months in separate statements released Monday.
The DOL on Nov. 27 officially announced the 18-month extension from Jan. 1, 2018, to July 1, 2019, of the special Transition Period for the Fiduciary Rule’s Best Interest Contract Exemption and the Principal Transactions Exemption, and of the applicability of certain amendments to Prohibited Transaction Exemption 84-24 (PTEs). This follows public comment on a proposed extension that was published in August.
Two provisions of the rule — one that expands the number of financial advisors who are deemed fiduciaries and another that sets impartial conduct standards — were implemented back in June.
In announcing the extension, the DOL said it gives the Department the time necessary to consider public comments submitted pursuant to the Department’s July Request for Information, and the criteria set forth in the Presidential Memorandum of Feb. 3, 2017, including whether possible changes and alternatives to exemptions would be appropriate in light of the current comment record and potential input from, and action by the Securities and Exchange Commission, state insurance commissioners and other regulators. The President directed the Department to prepare an updated analysis of the likely impact of the Fiduciary Rule on access to retirement information and financial advice.
ACLI President and CEO Dirk Kempthorne said his organization agrees with the department’s desire to promote coordination among regulatory stakeholders.
“The evidence before the department is clear. The fiduciary regulation has harmed small and moderate retirement savers by restricting or eliminating access to retirement products and services, creating an advice gap for those most in need of help. Its bias against commission-based arrangements restricts consumer access to annuities – the only product in the marketplace providing guaranteed lifetime income,” Kempthorne said in Monday’s ACLI statement.
“Full implementation of the regulation must be delayed to allow the department, state insurance regulators, the SEC, FINRA and Congress to work in concert on reasonable and appropriately tailored rules that require all sale professionals to act in the best interest of their customers,” Kempthorne added. “A collaborative and harmonized approach would ensure all consumers receive retirement savings information and related financial guidance from financial professionals acting in their best interest, regardless of the retirement products they purchase.”
The IRI’s statement from President and CEO Cathy Weatherford echoed the sentiment commending the 18-month extension. “Evidence gathered since the June 9 partial implementation has demonstrated that consumers are being adversely impacted by this rule. This delay will allow the DOL to take the time it needs to determine how to revise the rule to prevent these adverse effects from continuing,” Weatherford said. “IRI has long supported the establishment of a best interest standard of conduct that preserves access to affordable financial advice and a wide array of lifetime income products. As evidenced by the comments submitted to the DOL by IRI and numerous other interested parties, the fiduciary rule has proven to be overly burdensome and complex, and has made it increasingly difficult for Americans to access affordable advice from financial professionals.”
During the extended Transition Period, fiduciary advisers have an obligation to give advice that adheres to “impartial conduct standards.” These fiduciary standards require advisers to adhere to a best interest standard when making investment recommendations, charge no more than reasonable compensation for their services, and refrain from making misleading statements.
Further, between now and July 1, 2019, when the exemptions’ remaining conditions are scheduled to become applicable, the Department intends to complete its review under the Presidential Memorandum and decide whether to propose further changes.
The Department has also announced an extension of the temporary enforcement policy contained in Field Assistance Bulletin 2017-02 to cover the 18-month extension period. Thus, from June 9, 2017, to July 1, 2019, the Department will not pursue claims against fiduciaries working diligently and in good faith to comply with the Fiduciary Rule and PTEs, or treat those fiduciaries as being in violation of the Fiduciary Rule and PTEs.
The extension will be published in the Federal Register on Nov. 29 – an “unpublished” PDF version can be downloaded here.
