DOL Releases New Guidance on Fiduciary Rule
November 2, 2016 by Frank Klimko
WASHINGTON – The U.S. Labor Department released a new guidance — in the form of an online FAQ — to help investment advisers comply with the DOL conflict-of-interest fiduciary rule that goes into effect next April.
Transactions which apply the Best Interest Contract exemption won’t have to comply with all the new rules until Jan. 1, 2018, the guidance said. The BIC was designed to permit broker-dealers to continue to receive commissions.
“The transition period gives these fiduciaries additional time to prepare for full compliance with all of the conditions of the exemptions, while providing basic safeguards to protect the interests of retirement investors,” the guidance said.
Much of the FAQ focused on questions concerning implementation of the BIC.
The FAQ noted the BIC exemption does not cover advice provided solely through an interactive website in which computer software-based models provide recommendations based on information solely supplied by the customer, the so-called robo-advice. The department said it did not apply the BIC to such advice based on its view that the marketplace for robo-advice is still evolving, the FAQ said.
The BIC is at the center of several of the six lawsuits filed in federal court to derail the rule. For example, attorneys for the American Council of Life Insurers argue in their lawsuit the DOL overstepped its authority when it required fiduciaries using the BIC to agree to be sued for breach of contract.
The ALCI consolidated case will be heard Nov. 17 in the U.S. District Court for the Northern District of Texas (Best’s News Service, Oct. 17, 2016).
Financial service provider Thrivent Financial for Lutherans filed suit because it said the BIC would violate its relationship with its customers. The BIC requirement that disgruntled customers be allowed to sue renders inoperable Thrivent’s arbitration process it now uses to resolve claims. Judge Susan Richard Nelson, of the U.S. District Court for the District of Minnesota, has set a March 3 date for oral arguments.
Thrivent Financial for Lutherans has a current Best’s Financial Strength Rating of A++ (Superior).
(By Frank Klimko, Washington correspondent, BestWeek: Frank.Klimko@ambest.com)
