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March 03, 2017

Proposed Delay in Fiduciary Rule

On March 1, 2017, the U.S. Department of Labor (“DOL”) issued notice of a 60-day delay (the “Proposed Delay”) to the applicability date of the Fiduciary Rule (including both the investment advice regulation and the new and existing class exemptions).  The Proposed Delay was published in the Federal Register on March 2nd. See Proposed Delay, 82 Fed. Reg. 12319 (Mar. 2, 2017).  If the Proposed Delay is finalized in its current form, the Fiduciary Rule would begin to apply to affected entities on June 9, 2017, instead of the current date of April 10, 2017.  

In the preamble, DOL suggests that the proposed delay would harm consumers and invites comment on whether the Proposed Delay should be finalized.  The Proposed Delay provides for a 15-day comment period, which will end on March 17th. 

DOL issued the Proposed Delay in response to the Presidential Memorandum on the Fiduciary Rule, 82 Fed. Reg. 9675 (Feb. 3, 2017) (the “Memorandum”), directing DOL to study the Fiduciary Rule, and, if warranted, to rescind or revise it.  The preamble to the Proposed Delay suggests that DOL has already concluded that any delay generates losses for consumers that outweigh any savings a delay may generate for the financial services industry.  However, because the Memorandum requires DOL to conduct additional economic and legal analysis, DOL is considering delaying the Fiduciary Rule anyway.  DOL states that the Proposed Delay would provide DOL with time to complete this review and avoid a scenario in which the Fiduciary Rule is revised or revoked after becoming applicable.  In this regard, DOL believes a delay may be warranted to avoid potential disruption and confusion that could affect both the retirement services industry and consumers were the Fiduciary Rule to be abruptly changed or rolled back shortly after the Fiduciary Rule becomes applicable.

DOL determined that the Proposed Delay is likely to have an effect on the U.S. economy of at least $100 million and that it is a “major rule” subject to the Congressional Review Act.  DOL suggests that its existing data, derived from the regulatory impact analysis issued alongside the Fiduciary Rule, leads to the conclusion that the harm to investors arising out of the Proposed Delay would outweigh any benefit.  However, DOL stated its data is “uncertain and incomplete” and solicits comments on the costs and benefits of the Proposed Delay, noting that its data may overstate the benefits the Fiduciary Rule would provide to investors and understate the compliance costs that would be saved by the Proposed Delay.   

DOL also solicits comments on whether the Proposed Delay should be extended to a time period longer than 60 days or it should issue a partial delay of certain elements of the Fiduciary Rule.  In addition, DOL solicits comments on the analysis the Memorandum requires it to undertake.  DOL will accept comments on issues related to the Memorandum until April 16, 2017.  

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