Newsflash: Drip Drip Drip - Is the DOL's Fiduciary Rule Slowly Going Down the Drain?

August 09, 2017

The U.S. Department of Labor (the “DOL”) today (August 9, 2017) submitted a Notice of Administrative Action in the Thrivent v. Acosta litigation (D. Minn.). The Notice relates to the final regulation that defines who is a “fiduciary” of an employee benefit plan as a result of giving investment advice for a fee or other compensation (the "Regulation") promulgated by the DOL under the Employee Retirement Income Security Act of 1974, and to a related series of new and amended "prohibited transaction" class exemptions (collectively, the "Rule"). The highly controversial Rule became the subject of a February 3, 2017 Presidential Memorandum (which we previously discussed here) that was viewed by some as laying the groundwork for the substantial scaling back or even demise of the Regulation. However, as previously discussed here, the Regulation ultimately became partially applicable on June 9, 2017. 

Today's Notice of Administrative Action states that the Department has submitted a proposal to amend the "best interest contract" exemption and two other exemptions that form a part of the Rule so as to delay until July 1, 2019 the applicability of material portions of those exemptions, and also to extend until that time certain existing transition relief applicable to the exemptions. This action follows the release last week of FAQs that provides relief under the "408b-2" disclosure rules for certain issues that may arise as a result of the Regulation, and provides certain other Regulation-related relief. In those FAQs, the DOL mentioned "the unique circumstances of the Department’s ongoing review of the Fiduciary Rule and related exemptions." 

What to many was an implementation of the Regulation by the DOL that ran counter to an apparent hostility to the Rule throughout various quarters of the Trump administration has now been followed by a steady flow of further action that limits the scope of the Rule.* As we have noted before, this trend makes "[i]t increasingly [seem] unlikely that the full BIC Exemption and other certain suspended aspects of the Rule will become effective when 2018 arrives, and, indeed, there are multiple paths to a substantial rollback of the Rule in whole or in part." We now indeed have specific action that would delay the applicability of the suspended portions of the Rule beyond 2018, to mid-2019. It remains to be seen whether during that time a more substantial rollback or even elimination of the Rule will materialize. 

While today's Notice is welcome to those who may have been concerned about the possibility of full applicability of the overall Rule, it appears that the Regulation itself, to the extent it became applicable on June 9, will continue to remain applicable, at least for now. If you would like to discuss any aspect of the Rule, please contact any of the Dechert attorneys listed below or any Dechert attorney with whom you regularly work. 

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