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The New Fiduciary Rule and its Future

Financial advisingWith a sea of political change in Washington this year, many are speculating on what regulatory reforms the Trump administration and a Republican Congress will make in 2017. One reform in particular is commonly mentioned: a repeal, delay, or revision of the new Department of Labor ("DOL") fiduciary rule (the "Fiduciary Rule"). Given that the Trump administration is widely seen as anti-regulation, and the Fiduciary Rule is one of the most sweeping pieces of regulation regarding retirement investors and the financial industry since the implementation of the Employee Retirement Income Security Act ("ERISA") in 1974, speculation about the Fiduciary Rule's impending review and revision are not unfounded.


In April 2016, the DOL revised, and greatly expanded, its definition of the word "fiduciary" in regards to employee benefit plans governed under ERISA. The Fiduciary Rule states that fiduciary investment advice occurs when a person receives direct or indirect compensation from an investor for their investment advice to a plan, plan fiduciary, plan participant or beneficiary, IRA, or IRA owner. Under the Fiduciary Rule, which begins its implementation on April 10, 2017, ERISA will now prevent a fiduciary from earning money when they have given investment advice to a Plan or an IRA unless they can comply with an exemption provided by the DOL. This creates prohibited transactions that must either: (1) fall under an exemption; or (2) be prevented at the pre-contract or pre-investment stage of the adviser's relationship with the investor. Thus, it is incredibly important for an advisor to know what actions or advice will render the advisor a fiduciary under ERISA. Fiduciary status creates a new set of rules to comply with and responsibilities to an adviser's investors.

The Fiduciary Rule's future

No one can say with certainty what the future holds for the Fiduciary Rule. However, the Fiduciary Rule faces probable reform under an anti-regulatory administration given: (1) the massive compliance burden the Fiduciary Rule has placed on financial advisors and financial institutions offering IRAs or Plan administration services; and (2) the uncertainty regarding the application and enforcement of the Fiduciary Rule itself.

In future posts, we will give you more information regarding the Fiduciary Rule, its application, and any changes made to it by the new administration, Congress, or the DOL. As always, please contact a Foster Swift attorney if you have any questions regarding the new Fiduciary Rule.

Categories: Employment, News

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