United States: It's Official! DOL Finalizes Delay

The Fiduciary Rule transition period is extended until mid-2019, with financial institutions having flexibility in complying with the impartial conduct standards during this period.

The US Department of Labor (DOL) has finalized an 18-month extension of the transition period under the new Best Interest Contract (BIC) and the Principal Transactions (PrT) exemptions and the amended Prohibited Transaction Exemption 84-24 (the PTEs). This means that the full conditions (as originally finalized) of the PTEs—including the contract, warranty, and specific policies and procedures and disclosure conditions—will not become applicable until July 1, 2019, subject to the DOL's ongoing review of the Fiduciary Rule and expected changes. In the meantime, exemptive relief under the BIC and PrT will be available so long as fiduciaries comply with the "impartial conduct standards" (ICS) that include prudence, loyalty, reasonable compensation, and disclosure.

Here are some highlights from the release:

  • Continued compliance flexibility during the transition period. Although the DOL emphasized that it expects that fiduciaries relying on the PTEs will "adopt prudent supervisory mechanisms to prevent violations of the" ICS, the DOL also reiterated that they have flexibility as to their approach to compliance during the transition period and cited its prior guidance in this regard, including the Conflict of Interest FAQs (Transition Period).

    As discussed in our previous commentary on the Fiduciary Rule, we believe this guidance indicates that the DOL does not view the ICS as per se requiring financial institutions to adopt specific policies and procedures, including new compensation structures (such as by leveling compensation within product categories, or eliminating back-end awards and cliff-vesting in compensation grids). Rather, these requirements would become applicable if and when the full conditions of the BIC and PrT exemptions become applicable.

    Nonetheless, the DOL indicated that firms can look to the not-yet-applicable conditions of the exemptions for guidance, and that although compliance with these conditions is not required during the transition period, reliance on them would constitute "good faith compliance" for purposes of the DOL's temporary enforcement policy. The DOL further emphasized that it expects financial institutions will continue to "exercise care" in communications with retirement investors, including fairly disclosing and accurately describing recommended transactions and compensation practices.
  • Observation: As the ICS currently apply under the PTEs, financial institutions should continue to take meaningful steps to comply with them, including by identifying and addressing any potential conflicts in providing investment advice to retirement investors and ensuring effective disclosures.

    However, in developing approaches to compliance, financial institutions may also want to consider the flexibility the DOL has provided, including in light of the ongoing re-examination of the Fiduciary Rule by both the DOL and the US Securities and Exchange Commission (SEC), as well as industry developments and evolution in response to the rule.
  • Temporary enforcement relief extended. The DOL also extended the temporary enforcement relief under Field Assistance Bulletin 2017-2 to July 1, 2019. This means that during the extended transition period, the DOL and the Internal Revenue Service (IRS) will not pursue claims or cite violations against investment advice fiduciaries who are working "diligently and in good faith to comply" with their fiduciary duties and to meet the conditions of the PTEs. According to the DOL, in reviewing the "compliance efforts of firms and advisers during the transition period, it will focus on the affirmative steps that firms have taken to comply with the Impartial Conduct Standards and to reduce the scope and severity of conflicts of interest that could lead to violations of those standards." The DOL further noted that "it remains critically important that firms take action to ensure that investment recommendations are governed by the best interests of retirement investors, rather than the potentially competing financial incentives of the firm or adviser."

    • Observation: As discussed above, financial institutions should continue to take meaningful steps to comply with the ICS during the transition period, while taking into account the flexibility as to the approach that the DOL has adopted for this period. As such relief is subject to the "diligence and good faith" condition, firms should consider approaches to demonstrate satisfaction of this requirement, which may include maintaining summaries or action plans for complying with the elements of the ICS, as discussed above.

      It is also important to note that the DOL and IRS temporary enforcement policy is not binding on potential litigants or other regulators, including the SEC, the Financial Industry Regulatory Authority (FINRA), bank regulators, or state securities or insurance regulators.
  • Streamlined Exemption Forthcoming. The DOL again indicated that it intends to formulate and propose a new streamlined class exemption in the "near future."

    • Observation: Although there are no details available on the proposed streamlined exemption, in discussing why it did not adopt a delay that would be conditioned on the financial institution adopting a particular compliance approach or using a particular product structure (e.g., clean shares), the DOL stated that recent marketplace innovations "seem more relevant in the context of considering the development of additional and more streamlined exemption approaches." Thus, we anticipate that the proposed streamlined exemption will incorporate new products or structures in some regard.
  • Coordination with Other Regulators. The DOL reiterated its desire to coordinate with other regulators, such as the SEC, FINRA, and the National Association of Insurance Commissioners in developing proposals or changes to the PTEs, pointing out that the chairman of the SEC is seeking public comments on the standards of conduct for SEC-regulated entities and has welcomed the DOL's "invitation to engage as the SEC moves forward with its examination of the standards of conduct applicable to investment advisers and broker-dealers, and related matters."

    • Observation: We encourage affected firms to submit comments to the SEC.
  • Solicitation of Additional Comments. The DOL also indicated that it remains available to support interested parties in their efforts to comply with the Fiduciary Rule and related PTEs, and to discuss "the compliance approaches they have adopted or plan to adopt." Further, the DOL stated that it welcomes additional comment, input, and data from stakeholders in the community regarding the implementation of the ICS, grandfathering relief under the BIC, and product limitations under the PrT.

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