The Department of Labor is yet again giving advisory firms more time to comply with its expansive fiduciary rule, according to an attorney with the law firm Faegre Drinker.

The DOL currently has a non-enforcement policy toward the new rule, which went into effect last February, but that arrangement was set to expire on December 20. At that point, the complex rule, known as the prohibited transaction exemption (or PTE 2020-02) would kick in. The rule governs how registered reps and advisors analyze and disclose rollover recommendations for investors in retirement plans and IRAs. 

“The word on the street is that the extension of the non-enforcement policy will be for 60 to 90 days,” said Faegre Drinker’s Fred Reish, a partner at the firm, in an interview with Financial Advisor. “That would provide additional time, from December 20 to February or March. I am hearing that one of the reasons for the extension is to allow data providers more time to develop their systems to provide plan information to financial institution for purposes of evaluating rollovers.”

Retirement plan data is critical because the rule requires financial firms to analyze investors’ current plan and IRA assets, costs and performance before they can recommend rollovers that are in investors’ best interest.

More than 50% of broker-dealer and registered investment advisory firms reported in September that they are still in the earliest days of planning to comply with the rule, despite the looming deadline, according to an informal poll from InvestorCOM.

“In terms of relief, the largest financial institutions are making good progress towards the December 20 deadline, but of course, additional time is always welcome,” Reish said.

“The mid-market is not as far along,” he said, “so the additional time will be very helpful to them. That’s also true for some smaller RIAs and broker-dealers, but I am concerned that some smaller firms don’t realize that the new rules will have a material impact on them. The extended time limit will only matter for them if they recognize what needs to be done and how much work it is. Hopefully, that will be the case.”

The Department of Labor did not immediately respond to a request for information at deadline.

Eight trade associations and the law firm of Davis & Harman sent a letter to the department’s Employee Benefits Security Administration on September 23 asking the agency for more time to prepare for implementation of the fiduciary rule.

In the letter, the groups asked the agency to extend the temporary enforcement policy by at least six to 12 months beyond December 20.

The letter said, “All stakeholders would benefit from such an extension,” which would allow firms to “thoughtfully consider” using the rule and implementing it. The extension would also reduce the consumer confusion and disruption that is likely to ensue if the agency held fast to the December deadline, the trade groups said.

The groups signing the letter included the Insured Retirement Institute (IRI), the Investment Company Institute (ICI), the National Association of Insurance and Financial Advisors (NAIFA), the Securities Industry and Financial Markets Association (SIFMA) and the U.S. Chamber of Commerce.

The groups also asked the agency to pause plans to propose further changes to the rules for investment advice fiduciaries until there is sufficient evidence that further changes are needed. The DOL said in its regulatory agenda over the summer that it planned to create new regulation.

Although “firms may be technically able to comply by December 20,” said the trade groups, “it is important for financial institutions to be confident that their efforts preparing for implementation and compliance will be smooth and secure.”

“This is achieved by having the time to refine and test their compliance tools and mechanisms,” the trade group letter continued. “More time will allow firms to ensure that all the exemption’s participant protections are fully in place, without the types of errors and disruption that will confuse and frustrate retirement savers and their advisors.”

Like Reish, the trade associations said they are also “quite concerned that many small firms may have been less aware of the December 20 expiration of the temporary enforcement policy than larger firms.”

“For the larger firms, this has been an ongoing effort that in many cases began months ago by devoting substantial resources toward compliance. Such resources are not readily available to small firms,” the trade groups wrote.