DOL Releases FAQ on Conflicts of Interest During the Transition Period

May 30, 2017

DOL Releases FAQ on Conflicts of Interest During the Transition Period

WHAT HAPPENED?

The Department of Labor has released an FAQ focused on the transition period after the June 9th implementation of the Fiduciary Rule and related prohibited transaction exemptions. The FAQ also provides guidance on specific provisions in the exemptions that have been further delayed to January 1, 2018.

KEY TAKEAWAYS

The DOL emphasized the following points in their FAQ:

• The Department confirmed that parties will not be treated as fiduciaries under the Fiduciary Rule before June 9, 2017.

• Starting June 9, 2017, there will be a transition period extending until January 1, 2018, during which time fewer conditions will apply to financial institutions and advisers that seek to rely upon the exemptions.

• The DOL has now delayed applicability of the 2016 amendments until January 1, 2018, except for the impartial conduct standards. If firms are in the process of creating new compensation systems that would effectively reduce conflicts of interest but are not in full compliance during the transition period, then the BIC Exemption remains available pursuant to the firm’s compliance with the impartial conduct standards.
  • The impartial conduct standards require advisers and financial institutions to act in the best interest of customers, charge no more than reasonable compensation, and not make any misleading statements.

• Section VII of the BIC Exemption provides grandfathering relief for specified compensation received from investments made and systematic purchase programs established before the Fiduciary Rule’s applicability date. All advice provided to these grandfathered investments after the June 9th applicability date must comply with the best interest standard.

• The DOL is currently engaging in a thorough analysis of issues addressed in the President’s Memorandum and intends to issue a Request for Information (RFI) to obtain ideas from stakeholders for possible regulatory changes.

• The DOL’s enforcement policy during the transition period will focus more on compliance assistance rather than imposing penalties as long as fiduciaries are working diligently and in good faith to comply with the new rules.

WHAT DOES THIS MEAN FOR ME?

Fairview^® is assisting its clients with reviewing and updating their compliance program in preparation of the June 9th applicability date. Fairview^® will also continue to update clients if any new information becomes available concerning the Fiduciary Rule and related exemptions.

Sources: https://www.dol.gov/sites/default/files/ebsa/about-ebsa/our-activities/resource-center/faqs/coi-transition-period.pdf