The Department of Labor's "fiduciary duty" Rule continues to get more bollixed up. DOL announced a temporary enforcement policy that will give a "free pass" for any violations (a) in the gap between effective date and delay, or (b) tardy good-faith compliance if there's no delay.
The Rule becomes effective on April 10, requiring among others a fiduciary acknowledgement (even though full BIC contract compliance won't be required until January 1, 2018). DOL published a proposed delay for 15-day comment on March 2, with a broader "merits" comment period extending thereafter. If adopted, the Rule will delay implementation for at least 60 days.
So there may be a gap between the April 10 effective date and final publication of the 60-delay (if adopted). DOL's "Field Assistance Bulletin No. 2017-01" issued late last week instructs regional enforcement directors to forbear from enforcement actions against non-compliant firms during a "gap" before delay, or for tardy compliance if DOL does not delay the Rule. That Bulletin is here: https://www.dol.gov/agencies/ebsa/employers-and-advisers/guidance/field-assistance-bulletins/2017-01
Although the Bulletin provides some scant regulatory-enforcement comfort, it does not alleviate any risk arising from the central private-civil-action enforcement tenet of the Rule.
As we noted in prior posts on the subject, litigation to invalidate the Rule is working its way through the appellate courts, while legislation to revoke it is percolating through Congress. And it's possible that a new "delay rule" will meet with court challenges from the other side of coin.
In a massive understatement, the Bulletin cites "concern about investor confusion and other marketplace disruption based on uncertainty." Indeed, the Bulletin notes that some firms are contemplating investor communications that are conditional: "We are your fiduciary, but only if the Rule becomes applicable."
Thomas K. Potter, III (tpotter@burr.com) is a partner in the Securities Litigation Practice Group at Burr & Forman, LLP. Tom is licensed in Tennessee, Texas and Louisiana. He has over 30 years' experience representing financial institutions in litigation, regulatory and compliance matters. See attorney profile.
© 2017 by Thomas K. Potter, III (all rights reserved).
PartnerTom Potter is a Partner in the firm's Nashville office, and his practice focuses on securities, corporate disputes, and appellate litigation. Tom has over 35 years of experience representing business interests.
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