The DOL issued a Field Assistance Bulletin (FAB 2017-01) on Friday, March 10, 2017 to address near-term compliance concerns relating to a proposed 60-day delay of the Fiduciary Rule. As previously reported, the DOL issued a proposal on March 2, 2017 to delay the April 10, 2017 implementation date of the Fiduciary Rule by 60 days. This 60-day delay is not yet final, however, and there has been confusion over what will happen if a decision on the delay is not made until after April 10 or if a decision is made too close to the implementation date to allow time for compliance. Although the DOL has stated that it intends to issue its decision before April 10, it issued the Bulletin to announce a temporary enforcement policy which provides certain limited enforcement relief.
With recent developments in all three branches of government bearing on the authority and timing of the new DOL final rule expanding the definition of fiduciary “investment advice” for purposes of ERISA, the already formidable challenges for plan sponsors and retirement product and service providers have been made more difficult.
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A proposal seeking to delay the applicability date of Department of Labor’s fiduciary duty rule (“DOLFR”), which impacts the compensation received by broker-dealers and investment advisers for the distribution of covered retirement accounts, was published on Thursday, March 2, 2017. According to the federal register’s notice, the applicability date (which had been scheduled for April 10, 2017) was proposed to be delayed by 60-days to June 9, 2017. The proposal allows for a 15-day comment period from the March 2, 2017 publication date, which would end on March 17, 2017. The proposal also invited comment on a February 3, 2017 Presidential Memorandum to the Secretary of Labor, requesting broader review of DOLFR and its related exemptions.
For more on the DOLFR, including legal alerts and commentary, see www.dolfiduciaryrule.com.
The SEC staff’s recent guidance on robo-advisers is the most comprehensive SEC guidance to date concerning the considerations robo-advisers should keep in mind in meeting their legal obligations under the Advisers Act. The staff notes that robo-advisers, like all registered investment advisers, are subject to the substantive and fiduciary obligations of the Advisers Act. The staff further indicates that because robo-advisers rely on algorithms, provide advisory services over the internet, and may offer limited, if any, direct human interaction to their clients, their unique business models may raise certain considerations when seeking to comply with the Advisers Act.
In a recent Risk Alert, the staff of the Office of Compliance Examinations and Inspections (“OCIE”) of the Securities and Exchange Commission (“SEC”) observed that one of the most frequent deficiencies identified in OCIE examinations was the failure of investment advisers to recognize that they might be deemed to have custody of client assets for purposes of Rule 206(4)-2
(“Custody Rule”) under the Investment Advisers Act of 1940 (“Advisers Act”). On February 21, the staff of the SEC’s Division of Investment Management provided additional guidance under the Custody Rule that addressed three situations where there have been significant questions as to whether an investment adviser has custody of client assets:
- when the adviser has limited authority to transfer client assets pursuant to a standing letter of instruction or other similar asset transfer authorization arrangement (“SLOA”) established by a client with a qualified custodian;
- when an agreement between the client and its custodian appears to provide the adviser with access to client assets—even if the investment adviser is not a party to such agreement; and
- when the adviser has the authority to move money between the client’s own accounts (“first-person transfers”).
Additional contributor to this post:
Gregory T. Larkin, firstname.lastname@example.org