Market Observers Optimistic Over Further Changes to DOL Rule
June 13, 2017 by Frank Klimko
WASHINGTON – Market observers expressed optimism the U.S. Labor Department will modify elements of the newly effective fiduciary rule before the final deadline next January, when retirement advisers must comply with all parts of the Best Interest Contract Exemption.
“The whole conversation around regulatory impact analysis is critical,” said Robert Doyle, vice president, Prudential Financial Inc. “Studies have been provided to the department. At some level they’ve been given short shrift.”
“As Secretary Acosta starts to build his political team, there is some optimism that data will be given a fresh look,” Doyle said at the Insured Retirement Institute’s annual Government, Legal and Regulatory Conference. “I remain optimistic that the department will be taking a fresh look.”
Despite protests from the industry, which called for further delays in the rule, it became effective on June 9. It changes the way investment advice is delivered, eliminating products or services that may not be in the best interest of retirees or investors (Best’s News Service, June 8, 2017).
Under the new rule, advisers must comply with the initial phase of the new Best Interest Contract Exemption, which they can use if they want to receive commissions. Trade groups had argued the BIC, which allows fiduciaries to be sued for breach of contract related to the best interest standards, was an illegal private right of legal action (Best’s News Service, May 23, 2017).
Stephen Saxon, chairman of the Groom Law Group, anticipated the DOL would roll back the BIC, which requires a signed contract between the client and the adviser.
“There is a realization (at DOL) that the contract requirement went too far,” Saxon said. “That the dawn of a new phase of class action litigation against retirement service providers was too much to take. The question is: What are we going to get beyond that?”
“We have some reason to be optimistic but it’s still going to be quite challenging,” Saxon said. “The biggest focus has been on compensation, but I feel that if you are within the ballpark you ought to be OK.”
The full BIC compliance deadline is Jan. 1, but Doyle anticipated the DOL will request a postponement after the department receives a new round of comments on the RFI.
“There seems to be some clear signals from the department that they expect a further extension of the January date,” he said.
“In the context of the soon to be released RFI, we are anticipating proposals for — or a request for ideas relating to changes to — the BIC, possibly PTE 84-24, in addition to some new, possibly simplified, exemptions,” Doyle told Best’s News Service after the session, “at least one relating to the use of “clean shares” — an idea teed up in the most recent set of FAQs.”
(By Frank Klimko, Washington correspondent, BestWeek: Frank.Klimko@ambest.com)
