Financial industry trade groups are in discussions about whether to ask the U.S. Department of Labor to continue delaying enforcement of a sweeping fiduciary rule covering retirement plan advice.

The rule, implemented in February, states that a financial professional who gives retirement rollover or investment advice and benefits from it can only achieve an exemption, or Prohibited Transaction Exemption (PTE), from fiduciary rules if certain conditions are satisfied.

The DOL held off on enforcing the new rule to give firms more time to comply, but the regulations are scheduled to go into full effect on Dec. 20.

Financial industry officials, however, are concerned about their readiness to comply with the rule by December. The rule stipulates that investment advice fiduciaries who rely on any of the rule’s exemptions must be able to demonstrate that the advice they render is in retirement plan and IRA customers’ best interests if they want to receive compensation that would otherwise be prohibited, including commissions, 12b-1 fees, revenue sharing, and mark-ups and mark-downs in certain principal transactions.

Fred Reish, a partner at Faegre Drinker, who is working with a number of investment advisor, broker-dealer and insurance companies to help them implement the PTE, said that he has heard that some smaller and mid-sized firms are struggling and didn’t realize the rule applied to them or did not realize how labor-intensive and burdensome implementation would be.

To address that concern, the Financial Services Institute (FSI), the Insured Retirement Institute (IRI), the American Council of Life Insurers and other trade groups are weighing their options and considering asking for an extension of the DOL's grace period.

“If we were to ask for an extension it would be for additional time to get the systems in place that are necessary to comply with the requirements of the PTE and make sure that everything that is put into place has time to be implemented correctly and accurately,” said Robin Traxler, senior vice president of policy and deputy general counsel at FSI, which represents the independent broker-dealer industry.

Asked about when a decision will be made on a request for an extension, Traxler said, "It’s August and we’re looking at a December deadline, so definitely sooner than later."

“Our members are working diligently to implement the PTE, but we do understand from them the timeline is tight. I think if the correct coordination and communication takes place and firms are given time to accurately implement the PTE, there is no reason to believe investors will not be well served,” Traxler said.

IRI, meanwhile, has as among its concerns the fact that they have smaller insurance brokerage members who operate in small towns across the country. Because they don’t report to insurance company home offices, they would not meet the PTE mandates.

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