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DOL Axes Arbitration Ban from Fiduciary Rule

September 5, 2017

The Department of Labor will no longer enforce a provision in its fiduciary rule barring retirement account advisors from including arbitration waivers in client contracts, ThinkAdvisor writes.

Under the original rule, which purports to require retirement account advisors to put clients’ interests first and went into partial effect in June, advisors who wanted to use the best interest contract exemption were barred from making their clients waive their right to class-action lawsuits, the publication writes. That exemption let retirement account advisors sell some commission-based products after signing a best interest contract with the clients. According to the DOL’s new announcement, it will no longer enforce the ban, ThinkAdvisor writes.

The agency announced its decision in a new bulletin last week as it began a 15-day comment period to formally delay the final compliance deadline of the rule by 18 months, according to the publication. The DOL had signaled earlier this summer it wanted to drop the arbitration ban.

It then reiterated that the provision “will likely be mooted in the near future” following an injunction request brought by Thrivent Financial for Lutherans, which argued that a mere statement isn’t enough to keep other regulators from pursuing enforcement. In last week’s bulletin, the DOL said the Internal Revenue Service will likewise not enforce the arbitration ban, according to ThinkAdvisor.

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The Office of Management & Budget last week approved the DOL’s request to push back the rule’s final implementation date from January 2018 to July 2019. The DOL’s Employee Benefits Security Administration may take further measures to provide additional prohibited transactions relief, according to officials cited by ThinkAdvisor.

By Alex Padalka
  • To read the ThinkAdvisor article cited in this story, click here.