DOL’s Temporary Enforcement Policy Brings Cold Comfort

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.

About Frank Taylor

Frank Taylor is head of the Briggs and Morgan’s Financial Markets group and has more than 35 years of experience in complex financial markets litigation, class actions, regulatory investigations, enforcement proceedings and market conduct examinations. Frank has defended clients in some of the financial services industry’s most significant cases. To date, he has served as lead trial counsel in more than 100 class actions and has tried more than 350 matters to verdict, judgment or award in 42 states before federal, state and arbitration forums. Frank focuses his practice in counseling and representation of firms in various financial markets; complex litigation and arbitration in the financial markets; alternative dispute resolution; class action defense; regulatory investigations, enforcement proceedings and market conduct examinations; antitrust; and complex business disputes.
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One Response to DOL’s Temporary Enforcement Policy Brings Cold Comfort

  1. Pingback: Are You Ready to Comply With the DOL Fiduciary Duty Rule If It Goes Into Effect on April 10? (Part III: Your E&O Policy) | Financial Markets Law

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