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DOL Releases First Series of Fiduciary Rule FAQs

The Department of Labor has published its first set of frequently asked questions and accompanying answers to help financial services firms and others navigate the complex fiduciary rule, which goes into effect on April 10, 2017.

The fiduciary rule, which was six years in the making, attempts to reduce conflicts of interest in retirement investment advice and redefines who is considered an investment advice fiduciary under the Employee Retirement Income Security Act of 1974. According to the DOL, all who provide retirement investment advice to plans, plan fiduciaries and IRAs are required to abide by a “fiduciary” standard.

The 34 questions released on Thursday focus on conflict of interest exemptions, including one of the most controversial aspects of the rule, the best interest contract exemption. The BIC exemption allows advisors to recommend commission-based products if they expressly state that the investment is in the client’s best interest.

The questions, which can be read here, relate to compliance dates, general questions on the BIC exemption, level fee fiduciaries, bank networking arrangements, annuities, disclosures under the BIC exemption, grandfathered investments, and the principal transactions exemption.

“One of the first and most important efforts on this front is the publication of FAQs based on the input we’ve received from the financial services industry and others,” said Phyllis Borzi, the assistant secretary of labor at the DOL’s Employee Benefits Security Administration. “These questions are an important part of the regulatory process as they allow the department to clarify important parts of the rule, and head off misunderstandings that could lead to bad results for retirement savers, or financial services professionals.”

The DOL said that it has been and will continue to work together with fiduciaries, financial institutions, insurance companies, advisers, and others to help them come into compliance with the new rule and related prohibited transaction exemptions:

“Although the Department has broad authority to investigate or audit employee benefit plans and plan fiduciaries, compliance assistance is a high priority. The Department’s general approach to implementation will be marked by an emphasis on assisting (rather than citing violations and imposing penalties on) plans, plan fiduciaries, financial institutions and others who are working diligently and in good faith to understand and come into compliance with the new rule and exemptions.”

The FAQs published yesterday are the first of several that will be published in the coming months.

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