The Department of Labor’s Fiduciary Rule RFI

August 28, 2017

The U.S. Department of Labor recently released a Request for Information (RFI) regarding its Fiduciary Rule. According to the Department, this RFI “seeks public input that could form the basis of new exemptions or changes/revisions to the rule and PTEs.” They are further asking advice on whether or not the original January 1, 2018 applicability date should be postponed, and in the event of delayed applicability, they have also asked for an estimated “time expected to be required” for viable, long-term solutions to the new fiduciary guidelines.

The RFI listed “clean shares” as one of the best, long-term solutions “to the problem of mitigating conflicts of interest with respect to mutual funds.” However, funds will need more time to develop clean shares than is allowed by the Jan. 1, 2018 deadline for full compliance, hence the need for a new estimated compliance timeline.

The Department also listed fee-based annuities as a viable option for Fiduciary Rule compliance. In light of these innovative solutions, the Department would further like to know if “it would be appropriate to adopt an additional more streamlined exemption or other rule change for advisers committed to taking new approaches like those [listed above].”

In addition to these general commentaries on the transition period thus far, the DOL also listed over a dozen questions, including:

  • “Would a delay in the January 1, 2018 applicability date of the provisions…reduce burdens on financial service providers and… [allow] more efficient implementation…What costs and benefits would be associated with such a delay?”
      • “What has the regulated community done to comply…? Are there market innovations that the Department should be aware of beyond those discussed herein that should be considered in making changes to the Rule?”
      • Questions relating to the cost and efficiency of clean shares, including “How long is it anticipated to take for mutual fund providers to develop clean shares and for distributing Financial Institutions to offer them…?”
      • Question 9 seeks information of other streamlined approaches to the Fiduciary Rule outside of clean shares, T-shares, and fee-based annuities
      • “Are there ways in which the Principal Transactions Exemption could be revised or expanded to better serve investor interests and provide market flexibility? If so, how?”
      • “…To what extent would the ongoing availability of PTE 84-24 for specified annuity products, such as fixed indexed annuities, give these products a competitive advantage vis-a-vis other products covered only by the BIC Exemption, such as mutual fund shares?”
  • “To the extent changes would be helpful, what are the changes and what are the issues best addressed by changes to the Rule or by providing additional relief through a prohibited transaction exemption?”

Responses to these questions are due soon; responses regarding a delay of the January 1, 2108 date must be submitted on or before 15 days after the RFI is officially published in the Federal Register. All other responses must be submitted on or before 30 days after the RFI’s release in the Federal Register.

By Chandler Julian, CPA, AIF

Chandler is a CPA and serves as the firm's Chief Financial Officer.

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