United States: DOL Issues Proposed Delay Of Fiduciary Rule Compliance Date And Enforcement Relief

The proposal would extend the transition period to July 1, 2019.

The US Department of Labor (DOL) has proposed to delay the applicability of additional conditions of the Best Interest Contract (BIC) exemption, Principal Transactions (PrT) exemption, and PTE 84-24 (regarding insurance contracts and annuities) (together, the PTEs) from January 1, 2018 to July 1, 2019. The proposal is subject to a 15-day notice and comment period, ending on September 15, 2017. The DOL has also issued nonenforcement relief related to the PTEs' prohibitions against class action waivers and qualifications.

Highlights from the Proposed Delay

  • The proposal, if adopted, would extend the transition period for compliance to July 1, 2019. While the impartial conduct standards became applicable under the PTEs on June 9, 2017, additional conditions—including contracts, warranties, policies and procedures, and disclosure requirements—would be deferred to July 1, 2019 (rather than becoming applicable on January 1, 2018). The DOL acknowledged that in light of its need to complete the ongoing reexamination of the fiduciary rule (and accompanying exemptions) and its desire to coordinate its approach with the Securities and Exchange Commission, January 1, 2018 may not be a realistic date for the full conditions of the PTEs to become applicable.

    Though the delay will not be effective until the DOL issues a final rule, we view the DOL's proposal and the reasons it gave to support the delay as strong indications that a delay of the January 1 compliance date will be forthcoming. Given the compliance, technology, and other significant costs associated with the additional conditions (e.g., contract drafting and delivery, website builds, and support for on-demand disclosures), and the likelihood of changes based on the ongoing reexamination, we encourage firms to carefully reconsider their plans and commitment of resources for complying with the additional conditions of the PTEs by January 1.
  • The DOL again clarifies that the impartial conduct standards do not require fee leveling. In the release for the proposed delay, the DOL reiterated its prior guidance in FAQ 6 of the first set of Transition FAQs that firms do not need to adopt specific policies and procedures to meet the BIC and PrT exemptions' impartial conduct standards—including with respect to leveling financial advisor compensation. Rather, as described in our prior LawFlash, the DOL indicated that firms have flexibility as to how to safeguard compliance with the impartial conduct standards during this period.

    Observation: The DOL has clearly indicated its view that firms do not need to adhere to the specific requirements for policies and procedures under the BIC and PrT exemptions during the transition period and are not expressly required to make changes to their compensation and incentive structures. Instead, firms must adopt such "policies and procedures as they reasonably conclude are necessary to ensure that advisers comply with the impartial conduct standards . . . whether by tamping down conflicts of interest associated with adviser compensation, increased monitoring and surveillance of investment recommendations, or other approaches."

    Because the DOL has indicated that it may ultimately change the PTEs' conditions, and the ultimate shape of the fiduciary rule and its compliance requirements remain uncertain, firms may want to consider this flexibility in structuring their policies and procedures for compliance with the impartial conduct standards during the transition period, so that they can more easily adapt their business models to any changes the DOL proposes to make to the PTEs or fiduciary rule in light of its study.

  • The DOL indicates it will propose a streamlined exemption in the near future. The DOL indicated that "it will propose in the near future a new and more streamlined class exemption built in large part on recent innovations in the financial services industry."

    Observation: The conditions of this streamlined exemption remain unknown, though the DOL has previously indicated an interest in products such as mutual fund clean and T-shares, as well as fee-based annuities. We will continue to monitor developments in this area.

  • The DOL requests comments on proposal. The DOL outlines four different delay structures it considered and requests further comments on each:
  1. A time-certain delay (e.g., 18 months).
  2. A delay that would end a specified period after the occurrence of a specific event (e.g., a delay lasting until 12 months after the DOL concludes its review as directed by the presidential memorandum).
  3. A tiered approach (e.g., delaying the end of the transition period until the earlier or the later of (a) a date certain or (b) the end of a period following the occurrence of a defined event).
  4. A delay conditional on the behavior of the entity seeking relief (e.g., whether the entity is taking steps to use a market innovation to comply with the rule).

The DOL also solicits comments on whether its temporary enforcement policy, whereby it will not pursue claims against investment advice fiduciaries who are working diligently and in good faith to comply with the new rules and PTEs, should be extended for the same period.

Additional Nonenforcement Relief

The DOL also issued additional nonenforcement relief in Field Assistance Bulletin (FAB) 2017-03. Citing its position in a brief filed in a pending lawsuit challenging the fiduciary rule and exemptions, the DOL states that it (and the Internal Revenue Service) will not pursue a claim against any fiduciary for a failure to comply with the BIC and PrT exemptions' prohibition against class action waivers and qualifications that is otherwise scheduled to become applicable (absent an extension or amendment) on January 1, 2018. The FAB states that this policy will continue to apply as long as the PTEs include this prohibition. Thus, this relief will continue even if the transition period is not extended.

Observation: We view the nonenforcement relief, as well as the DOL's statements recently made in litigation challenging the fiduciary rule, as a strong indication that the DOL will propose to eliminate the restrictions on class action waivers and qualifications in the PTEs. Nonetheless, firms will still want to consider the extent to which an investor's right to pursue class actions may be limited under other federal and state laws, including FINRA rules applicable to registered broker-dealers.  

What Firms Should Do Now

We strongly encourage interested parties to comment on the proposed extension by September 15, 2017. We caution that until a final rule is published in the Federal Register, the PTEs will continue to reflect the January 1, 2018 applicability date. As such, firms will want to evaluate how best to address this uncertainty in determining their compliance plans.

This article is provided as a general informational service and it should not be construed as imparting legal advice on any specific matter.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions