The Department of Labor will delay full enforcement of its investment advice rule for about six weeks until Jan. 31, 2022, according to a bulletin released Monday afternoon.
The investment advice rule has two main parts: a new prohibited transaction exemption allowing advisors to provide conflicted advice for commissions; and a reinstatement of the "five-part test" from 1975 to determine what constitutes investment advice.
It replaces the Obama administration fiduciary rule, which imposed substantial regulations on commission-based sales of annuities. A federal appeals court sided with industry plaintiffs and tossed out the rule in 2018.
While the investment advice rule is viewed as a more palatable regulation, many firms were reportedly struggling to meet the Dec. 20 compliance deadline. Bradford P. Campbell, partner at Faegre Drinker Biddle & Reath, discussed the possibility of an enforcement delay during an Oct. 13 webinar with Insurancenewsnet.
In guidance released Monday, the DOL stated:
For the period from December 21, 2021, through January 31, 2022, the Department will not pursue prohibited transactions claims against investment advice fiduciaries who are working diligently and in good faith to comply with the Impartial Conduct Standards for transactions that are exempted in PTE 2020-02 or treat such fiduciaries as violating the applicable prohibited transaction rules.
Impartial Conduct Standards are a best interest standard, a reasonable compensation standard, and a requirement to make no materially misleading statements.
The new rules include Prohibited Transaction Exemption 2020-02, designed to allow fiduciary advisors to qualify to be paid a commission for selling products or services to qualified plan participants and individual retirement account owners.
In Monday's guidance, the DOL said it will not enforce the specific documentation and disclosure requirements for rollovers in PTE 2020-02 through June 30, 2022. All other requirements of the exemption, however, will be subject to full enforcement as of February 1, 2022.
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected] Follow him on Twitter @INNJohnH.