The Department of Labor’s (DOL) Temporary Enforcement Policy on the Fiduciary Duty Rule published on March 10, 2017 (Temporary Policy) has, from our point of view, little impact and serves merely to confuse.
The Temporary Policy seems to imply that the DOL will temporarily stay enforcement of the Rule. Specifically, the DOL states:
- If the DOL issues a rule after the April 10 implementation date that delays the Fiduciary Duty Rule, then the DOL “will not initiate an enforcement action” based upon any failure to comply with the Fiduciary Duty Rule or its exemptions during the “gap period” between the April 10 implementation date and the date the delay is implemented.
- If the DOL does not delay the April 10 implementation date, then the DOL “will not initiate an enforcement action” because a firm or advisor failed to comply with the Fiduciary Duty Rule or its exemptions, provided that the adviser or financial institution satisfies the applicable conditions of the Fiduciary Duty Rule and its exemptions, including sending out the required disclosures, within a “reasonable period” after the DOL announces that there will be no delay. https://www.federalregister.gov/documents/2017/01/19/2017-01316/best-interest-contract-exemption-for-insurance-intermediaries.
Field Assistance Bulletin No. 2017-10, copy here.
But, remember, when the Rule was published, the DOL emphasized that it would not bring enforcement actions because of limited resources. The DOL stated quite clearly that private litigation would serve as the enforcement tool.
If enforcement is left to private litigants, then the Temporary Policy has little or no impact, since the Temporary Policy does not prevent private litigants from bringing actions. Also, the reprieve for an undefined “reasonable period” does little to bring comfort or clarity.
Given the confusion created by the DOL’s Temporary Policy, it strikes us that the Rule should be vacated, and the process should begin anew. Businesses and investors need clarity, not an ever-changing field of play.