DoL Update July 2017

July 12, 2017

As noted earlier in the spring, the U.S. Labor Secretary decided not to halt the implementation of the new fiduciary rule completely.  Accordingly, partial implementation began in early June.  Here's a summary of additional developments.

DoL Request for Information--

At the end of June the Department of Labor (DOL) issued a request for information (RFI) regarding the 2016 final DoL Rules and the associated prohibited transaction exemptions (PTEs).

In its Request, DOL notes that it is still in the process of reviewing and analyzing the comments received in response to earlier requests in the spring of 2017.  In the RFI the DoL notes that, as it continues its review mandated by the Trump administration, it is seeking additional public comments regarding potential new PTEs and changes to existing PTEs and the fiduciary definition.  DOL also notes that the brokerage, advisor and fund industries have been quick to create recent innovations, like T Shares and Clean Shares, and that these offer the potential for creation of streamlined exemptions and compliance mechanisms. 

The RFI includes 18 questions (each with multiple sub-questions) on the following topics:

  • Potential delay of the current January 1, 2018 compliance date;
  • General questions regarding the rule and the PTEs, compliance activity to date, and the costs, benefits and alternatives to the PTE conditions scheduled to become required on January 1, 2018;
  • The contract requirement in the BIC Exemption and Principal Transactions Exemptions, including whether the contractual and warranty requirements should be altered or eliminated;
  • Possible alternative streamlined exemptions (such exemptions may be based on clean shares, fee-based annuities, other market innovations);
  • Incorporation of securities regulation of fiduciary investment advice;
  • Principal transactions;
  • Disclosure requirements;
  • Contributions to plans or IRAs (i.e., should recommendations to make or increase contributions be excluded from the definition of advice);
  • Bank deposits and similar investments;
  • Grandfathering;
  • PTE 84-24; and
  • Communications with independent fiduciaries with financial expertise.

Comments relating to the potential delay of the January 1, 2018 compliance date are due July 21, 2017 (a very short 15-day comment period).  Comments related to all other questions in the RFI are due August 7, 2017 (a 30-day comment period).

The Request for Information can be found here:


Everyone is financial and political circles has their own position.  The ICI President had the following to say in his Quarterly Report today:

"DOL Fiduciary Rule: The Saga Continues

Newly minted Department of Labor (DOL) Secretary Alexander Acosta has wasted no time making his mark on the agency. Regrettably, his decision to forgo a further delay of his predecessor’s disruptive and harmful fiduciary rule did not immediately advance the interests of retirement savers.

Secretary Acosta says that his decision, announced in a Wall Street Journal op-ed, rests on “respect for the rule of law.” That may be so, but it doesn’t negate the fact that the rule had no business being adopted in the first place—and remains in dire need of an overhaul.

In our view, the DOL’s forthcoming examination of the rule—which will incorporate public comments on possible revisions, new exemptions, and whether to extend the full applicability date past January 1, 2018—can’t be concluded soon enough. Indeed, fund complexes and brokers are up to their ears in compliance costs, and fund shareholders already are paying more for investment advice or losing it entirely.

As we’ll explain in our own comment letters over the coming weeks, these costs—coupled with the legal and regulatory risks of assuming fiduciary status under the rule—have compelled brokers to offload more than half a million small retirement accounts since the DOL finalized the rule in April 2016. That extraordinary number, tabulated in surveys of ICI members, is expected to climb substantially as implementation efforts continue.

The upshot is that these shareholders are losing the advisory relationship that they depend on. And because of the move toward omnibus accounting, many funds no longer maintain the infrastructure required to provide advisory services to these accounts directly.

ICI has long advocated that the SEC and the DOL work together toward a single, harmonized best-interest standard—one that applies to both retirement and retail accounts. So we were quite pleased when, on June 1, new SEC Chairman Jay Clayton formally requested comments on standards of conduct for investment advisers and broker-dealers, and announced that the Commission would move forward with an examination of these standards. Separate appearances by Chairman Clayton and Secretary Acosta before Senate panels last month, in which they stressed cooperation between the two agencies, have further buoyed our spirits.

As the primary regulator of investment advisers and broker-dealers, the SEC is well-positioned to lead the way here. We strongly support Chairman Clayton’s initiative, and look forward to providing the Commission with all the information, data, and analysis it needs.


In addition to the Paul Schott Steven's observations and comments, law firms are publishing a variety of helpful articles.  Here's a selection:

Morgan Lewis's July summary of the recent DoL actions and request for comments:  DOL Seeks Additional Comments on Fiduciary Rule 

LPL's White Paper on Communicating the DoL Rule Changes to Clients, an interesting take:  "Communicating the DOL Fiduciary Rule begins with clearly explaining it."  (note: they want your contact information in exchange for the paper)

Mayer Brown law firm published an excellent paper on the impacts of the DoL rule on plan sponsors and the steps they should take now:  DOL Fiduciary Rule: Impact and Action Steps 

Dechert has also published a note on the Request for Information and current views of the Rule:   Chipping Away - Does the DOL's Fiduciary Rule Continue to Be on the Chopping Block? 


Clearly, this story will continue on for quite a while longer.

Posted by: Karl Hartmann, July 12, updated July 13, 2017