The Department of Labor plans to file in the Federal Register on Thursday a 15-day comment period for its proposed 18-month delay to the more onerous provisions of its fiduciary rule — and states that it plans to propose a new, more streamlined exemption built on "recent innovations" in the financial services industry.
The Office of Management and Budget approved Labor's 18-month delay request, which would extend the transition period and delay applicability for three exemptions from Jan. 1, 2018, to July 1, 2019.
Also on Wednesday, Labor issued a Field Assistance Bulletin setting out an enforcement policy on arbitration limitation in the rule's best-interest contract exemption, or BICE, and the principal transactions exemption.
Labor's proposal to extend the applicability date for the final BICE to July 1, 2019 includes the class-action provision of BICE.
In the Field Assistance Bulletin, Labor is "signaling that it plans to amend the final version of BICE to exclude the requirement that class-actions be permitted," said Fred Reish, partner in Drinker Biddle & Reath's employee benefits and executive compensation practice group in Los Angeles.
As noted on page 20 of the 39-page notice for comment in the Federal Register, Labor said that it "anticipates it will propose in the near future a new and more streamlined class exemption built in large part on recent innovations in the financial services industry."
George Michael Gerstein, a lawyer with Stradley Ronon in Washington, called the plan for a new exemption "quite exciting."
Said Gerstein: The new streamlined class exemption will likely be a "less onerous exemptions for certain products that have few conflicts of interest, and perhaps a variation of the streamlined best-interest contract exemption." The streamlined exemption would be independent of the current BICE, he said, and "it looks like it will be nimble enough for new innovations in the financial services industry," such as clean shares.
Reish said that the 15-day comment period puts the amended delay date "on a fast track," with an "almost certain" effective date before the current Jan. 1, 2018 applicability date. This means, he adds, "that the transition rules will be applicable until June 30, 2019."
As Reish notes, Labor's regulation with the expanded fiduciary definition "is already in final form and became fully applicable on June 9."
Also, he adds, "some of the prohibited transactions are already applicable," however, "for three of the most important exemptions — the best-interest contract exemption, PTE 84-24 and the principal transaction exemption — only the transition versions became applicable on June 9."
