Eight trade associations and the law firm of Davis & Harman sent a letter to the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) today, asking for more time to prepare for implementation of the agency’s so-called 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, when the agency’s non-enforcement policy expires and the full rule (PTE 2020-02) goes into effect.
The rule stipulates that investment advice fiduciaries who rely on any of the rule’s exemptions must be able to demonstrate that the rollover advice they render to retirement plan and IRA customers is in the customers’ best interest if the advisors want to receive compensation that would otherwise be prohibited, including commissions, 12b-1 fees, revenue sharing and markups and markdowns in certain principal transactions.
“EBSA and all stakeholders would benefit from such an extension,” which would allow firms to “thoughtfully consider” using the rule and implementing it, while reducing the consumer confusion and disruption that is likely to ensue if the agency holds fast to the December 20 deadline, the trade groups asserted.
Fred Reish, a partner at Faegre Drinker who is helping a number of investment advisors, broker-dealers and insurance companies implement the rule, said the DOL could extend that non-enforcement policy without going through the regulatory process. “That is, at least conceptually, the more likely action,” he said.
“Some of the exemptions are burdensome and they even apply when an advisor recommends that an investor roll over one IRA into another,” he added
The letter also asks 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.
If the agency does go forward with a new proposal, the temporary enforcement policy should stay in place for a reasonable period after that rulemaking is completed, the trade groups said.
Although “firms may be technically able to comply by December 20, it is important for financial institutions to be confident that their efforts preparing for implementation and compliance will be smooth and secure,” the trade groups said.
“This is achieved by having the time to refine and test their compliance tools and mechanisms. 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,” they wrote.