The Department of Labor (“DOL”) recently submitted a proposal to delay implementation of the remaining parts of its fiduciary rule from January 1, 2018 until July 1, 2019.  Two provisions of the rule, which greatly expands the definition of who counts as a fiduciary under the Employee Retirement Income Security Act and the Internal Revenue Code, took effect on June 9, 2017.  One remaining provision includes the best interest contract exemption, which allows brokers to charge variable compensation for products as long as they sign a legally binding agreement to put their clients’ interests ahead of their own.  The other exemptions include those for principal transactions and for insurance agents and brokers.

The postponement of the rule’s remaining exemptions is commensurate with the delays sought by financial industry opponents of the rule.  These opponents continue to express concern that the rule remains flawed in several critical areas.  The DOL continued to receive comments into late July asking for an extension of the January 1, 2018 compliance date and requesting the DOL act expeditiously so that brokers and banks could optimize the implementation of their compliance strategies and resources.

The delay is an important step in ensuring that the DOL coordinates with regulators to simplify and streamline the rule.  The Office of Management and Budget must review and approve the proposal before it can go into effect.