DOL Fiduciary Rule Extension. Recently, the Department of Labor (DOL) finalized a proposed 18-month extension for their transition period for firms to be in full compliance with the Best Interest Contract Exemption (“BICE”), Principal Transaction Exemption and PTE 84-24 from January 1, 2018 to July 1, 2019. The notice of the DOL’s Fiduciary Rule Extension was published in the Federal Register on November 29, 2017.
What does this mean for registered investment advisors? This extension by the DOL, as stated, is an extension of their transition period for implementation of the Best Interest Contract Exemption (“BICE”), Principal Transactions Exemption and PTE 84-24. What the DOL has left in place during this transition period, is registered investment advisors providing advice to their retirement clients are to comply with the Fiduciary standard as well as the Impartial Conduct Standards.
As a registered investment advisor, registered with either a state or federal regulator, on the day you become registered, you become a fiduciary on behalf of your clients. That means, you put your clients best interest ahead of your own and that of your advisory firm. This is inherent with all registered investment advisors.
The Impartial Conduct Standards under the DOL Fiduciary Rule are as follows:
- At the time of the recommendation, the recommendation is in the Best Interest of the Client;
- Compensation received cannot exceed reasonable compensation;
- Statements relating to an investment decision are not materially misleading.
Registered Investment Advisors are to be in compliance with these standards as of June 9, 2017; and, are to document your compliance file with the reason why the advice you provided to your client is considered in their best interest.
To the extent that financial institutions and registered financial advisors have already implemented policies and procedures designed to demonstrate compliance with the Impartial Conduct Standards, those policies and procedures should remain in effect. To the extent that such policies and procedures have not been adopted, financial institutions should seriously consider doing so. Even though the DOL has stated that its enforcement posture will continue to be focused on compliance assistance, depending on the facts, the DOL may conclude that certain compensation systems or other fact patterns are simply not in line with the Impartial Conduct Standards.
Contact Registered Advisor Services today for questions concerning the DOL Fiduciary Rule Extension.