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DOL Refuses to Drop Fiduciary Rule, But Won’t Pursue Violations

May 8, 2018

The Department of Labor made it clear Monday that it will not pursue retirement account advisors who violate its fiduciary rule — but neither is the agency letting go entirely of the recently vacated best-interest advice rule.

The same day the U.S. Court of Appeals for the Fifth Circuit was expected to issue a mandate to repeal the DOL’s rule, the Labor Department issued a Field Assistance Bulletin to its regional directors essentially saying the temporary enforcement policy in effect since June 9 remains in place. That policy states that the DOL “will not pursue prohibited transactions claims against investment advice fiduciaries who are working diligently and in good faith to comply with the impartial conduct standards for transactions that would have been exempted in the Best Interest Contact and Principal Transactions Exemptions, or treat such fiduciaries as violating the applicable prohibited transaction rules,” according to yesterday’s bulletin.

The DOL’s rule purports to require retirement account advisors to put clients’ interests first, and the BIC exemption allowed the sale of some commission-based products after the signing of a best-interest contract with clients. The DOL’s rule went into partial effect last June but, following a directive from president Donald Trump to review the rule, the agency postponed the final implementation date originally scheduled for this year, and in March the Fifth Circuit vacated the rule.

The DOL issued yesterday’s guidance because it realized the industry and retirement investors would have questions about fiduciary definitions and exemptive relief following the Fifth Circuit’s order, according to the DOL’s bulletin. The agency also plans to provide more guidance some time in the future, it says in the bulletin.

(Getty)

The bulletin doesn’t preclude the DOL from taking the Fifth Circuit’s decision to the U.S. Supreme Court, although that seems unlikely, according to the Wagner Law Group. But the bulletin is also “somewhat difficult to understand,” according to the group, since the agency does expect the Fifth Circuit to vacate the rule.

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