By Hillary V. Colonna

On January 2, 2018, the U.S. Department of Labor postponed key provisions of its Fiduciary Rule for the next 18 months.

The Fiduciary Rule was generally intended to expand the definition of who is considered a fiduciary, including investment advisors managing retirement accounts. The postponement was originally announced on November 27, 2017 by the DOL in 29 CFR Part 2550.

While the Rule originally provided for a transition period beginning on June 9, 2017 and ending on January 1, 2018, that deadline now officially has been extended. The new compliance date is July 1, 2019. The delay applies to the need to full comply with all of the requirements of the Best Interest Contract Exemption, the Principal Transaction Exemption, and Prohibited Transactions Exemption 84-24 (as amended). Also, the enforcement policy set forth in FAB 2017-02 is affected by the delay. The DOL has explained that, during the extended transition period, fiduciary advisors must “give advice that adheres to impartial conduct standards” and charge a reasonable compensation.

The DOL decided to postpone the Rule to consider public comments on the Rule and whether any changes or alternatives to the exemptions under the rule might be appropriate in light of those comments. Commentary was provided by, among others, the Securities Exchange Commission, state insurance commissioners, and other regulators, according to the DOL. The delay will also permit the DOL to comply with President Trump’s February 3rd memorandum ordering the DOL to review the Rule’s impact on the ability to receive financial advice.

In early 2017, industry opponents filed an appeal before the United States Court of Appeals for the Fifth Circuit contesting the Rule. Chamber of Commerce of the United States of America, et al. v. United States Department of Labor, et. al., No. 17-10238). In recent weeks, the appellants have asked the Fifth Circuit to rule upon the Rule’s validity, notwithstanding the postponement. In support of their request, the appellants argued that while some provisions of the Rule are postponed, other provisions that took effect on June 9, 2017 impose “ongoing compliance burdens”.

This pending case is the most highly anticipated ruling among several lawsuits filed against the DOL as a result of the Rule.