DOL Information Center


Definition of the Term "Fiduciary" & Related Exemptions – Proposed Delay of Applicability Dates

Fifth Circuit Officially Vacates Fiduciary Rule

On June 21, the Fifth Circuit Court of Appeals issued the formal mandate for its original March 15 ruling to vacate the Department of Labor (DOL) Fiduciary Rule, and it’s now “officially” invalidated. We’re currently working to update materials and disclosures as necessary to remove related references.

This development comes as the Securities and Exchange Commission (SEC) has introduced its Regulation Best Interest proposal and standard of conduct for broker-dealers. It’s worth noting that this is just a proposal that remains subject to formal administrative proceedings, including a required 90-day comment period ending on August 7.

We recognize there are a lot of moving pieces and we appreciate your partnership as we work together to navigate through the complexities and changing timelines.

Fifth Circuit Court Denies Challenge to Original Ruling

On Wednesday, May 2, the U.S. Court of Appeals for the Fifth Circuit rejected attempts by AARP and three states (California, Oregon, and New York) to intervene and challenge the court’s recent ruling to invalidate the Department of Labor (DOL) Fiduciary Rule. In addition, the DOL decided not to exercise its right to file an appeal with the court, and the deadline to do so expired on Monday, April 30. As a result, the court’s mandate officially invalidating the rule is expected to become effective on or around May 8.

Although any of these parties could still appeal the ruling to the U.S. Supreme Court by June 13, legal commentators are suggesting this is relatively unlikely, particularly in the case of the DOL, which allowed the Fifth Circuit decision to stand without further objection.

We remain focused on the SEC’s proposed rule for a best interest standard. The proposal remains subject to a 90-day comment period and we are actively engaging both on an industry level and with the SEC to provide input as a final version of the rule evolves. For additional information on the SEC proposal, please review our prior communication.

In light of ongoing uncertainty, the decisions, policies, and procedures we have already implemented in preparation for the DOL Rule will remain in effect while we continue to assess the SEC proposal and related regulatory developments. At this time, we believe that many of the policies and procedures will remain relevant and important for our continued compliance with other applicable laws, rules, and regulations, but we will continue to review those changes as the regulatory landscape evolves.

Additionally, we are reviewing all prior policies and procedures, account paperwork and other disclosures to remove any DOL Rule related references that may no longer be applicable as a result of the rule being invalidated. We are also requesting that you please consider whether you may have previously provided any customized materials to your clients making similar references, so that we can assist you with assessing whether any updating may be required.


Fifth Circuit Court of Appeals vacates DOL fiduciary rule

The Fifth Circuit Court of Appeals vacated the Labor Department's fiduciary rule in a split decision announced late Thursday afternoon, overturning a Dallas district court that was just as adamant in upholding the measure.

By a 2-1 vote, the appellate judges held that the agency exceeded its statutory authority under retirement law — the Employee Retirement Income Security Act — in promulgating the measure. The rule requires that brokers act in the best interests of their clients in retirement accounts.

The regulation replaced a five-part test that determined whether a broker was a fiduciary. The judges criticized a key provision of the rule, the best-interest-contract exemption. The BICE allows brokers to receive variable compensation for investment products they recommend, creating a potential conflict, as long as they sign a legally binding agreement to act in a client's best interests.

"The BICE supplants former exemptions with a web of duties and legal vulnerabilities," the majority opinion states. "Expanding the scope of DOL regulation in vast and novel ways is valid only if it is authorized by ERISA Titles I and II."

The lawsuit was brought by several industry groups that oppose the rule, including the U.S. Chamber of Commerce, the Securities Industry and Financial Markets Association and the Financial Services Institute.

A Dallas district court upheld the DOL rule in a decision last year that eviscerated the industry arguments against the rule. The industry decisively won in their appeal Thursday.

The DOL rule, which was promulgated during the Obama administration, has been partially implemented, while the remaining provisions are under a review mandated by President Donald J. Trump that could lead to major changes.

Source: Investment News - Fifth Circuit Court of Appeals vacates DOL fiduciary rule

September 2017 DOL Proposes 18 Month Delay

On August 31, 2017, the Department of Labor (DOL) proposed an 18-month delay of the remaining parts of the DOL fiduciary rule requirements, which includes the best interest contract (BIC) agreement, that are due to go into effect on January 1, 2018. If the proposed delay is approved, the additional requirements will take effect on July 1, 2019.
The DOL is accepting public comments on the proposal until September 15.
The DOL fiduciary rule requirements that are included in the proposal to delay until July 1, 2019, include:

• Delivery of a BIC agreement to IRA customers
• Enhanced point-of-sale transaction disclosures
• Website with individual BIC contracts and information on fees and services

June 2017 Update to DOL Rule

The Department of Labor (DOL) has proposed a delay in the applicability date of its Fiduciary Rule to June 9, 2017 in order to complete a review of the Rule which was ordered by President Trump.   On February 3, 2017, President Trump issued a memorandum asking the DOL to rescind or revise the Rule if it concluded that the Rule would adversely affect investors in any of the following three areas: 1) access to retirement products or advice, 2) dislocations or disruptions in the retirement services industry, or 3) increase in litigation and prices for retirement services.  Opponents of the Rule hope that the proposed delay will be followed by further moves to rescind or revise the Rule in response to the President’s memorandum.    
The DOL’s delay proposal is subject to public comments due by March 17, 2017, while public comments raised by President Trump’s memorandum are due by April 17, 2017.
Due to the uncertainties associated with the delay, the DOL has issued a policy to grant relief to firms for compliance violations that may occur as a result of such uncertainties.  There are two instances for which with the DOL will grant temporary relief to firms under this policy:

  • If the DOL delays the Rule, but a final delay is not issued until after the April 10th applicability date, the DOL will not enforce violations that occurred during that “gap” period.

  • If the DOL does not delay the rule, the DOL will not initiate an enforcement action for failure to satisfy conditions of the Rule by April 10th provided that the firm complies with the Rule within a reasonable period after the publication of a decision not to delay the April 10th applicability date.

Presidential Memorandum on Fiduciary Duty Rule


SUBJECT: Fiduciary Duty Rule

One of the priorities of my Administration is to empower Americans to make their own financial decisions, to facilitate their ability to save for retirement and build the individual wealth necessary to afford typical lifetime expenses, such as buying a home and paying for college, and to withstand unexpected financial emergencies.

Term "Fiduciary"; Conflict of Interest Rule Retirement Investment Advice, 81 Fed. Reg. 20946 (April 8, 2016) (Fiduciary Duty Rule or Rule), may significantly alter the manner in which Americans can receive financial advice, and may not be consistent with the policies of my Administration.

Accordingly, by the authority vested in me as President by the Constitution and the laws of the United States of America, I hereby direct the following:

Section 1. Department of Labor Review of Fiduciary Duty Rule. (a) You are directed to examine the Fiduciary Duty Rule to determine whether it may adversely affect the ability of Americans to gain access to retirement information and financial advice. As part of this examination, you shall prepare an updated economic and legal analysis concerning the likely impact of the Fiduciary Duty Rule, which shall consider, among other things, the following:

(i) Whether the anticipated applicability of the Fiduciary Duty Rule has harmed or is likely to harm investors due to a reduction of Americans' access to certain retirement savings offerings, retirement product structures, retirement savings information, or related financial advice;

(ii) Whether the anticipated applicability of the Fiduciary Duty Rule has resulted in dislocations or disruptions within the retirement services industry that may adversely affect investors or retirees; and

(iii) Whether the Fiduciary Duty Rule is likely to cause an increase in litigation, and an increase in the prices that investors and retirees must pay to gain access to retirement services.

(b) If you make an affirmative determination as to any of the considerations identified in subsection (a) or if you conclude for any other reason after appropriate review that the Fiduciary Duty Rule is inconsistent with the priority identified earlier in this memorandum then you shall publish for notice and comment a proposed rule rescinding or revising the Rule, as appropriate and as consistent with law.

Sec. 2. General Provisions. (a) Nothing in this memorandum shall be construed to impair or otherwise affect:

(i) the authority granted by law to an executive department or agency, or the head thereof; or

(ii) the functions of the Director of the Office of Management and Budget relating to budgetary, administrative, or legislative proposals.

(b) This memorandum shall be implemented consistent with applicable law and subject to the availability of appropriations.

(c) This memorandum is not intended to, and does not, create any right or benefit, substantive or procedural, enforceable at law or in equity by any party against the United States, its departments, agencies, or entities, its officers, employees, or agents, or any other person.

(d) You are hereby authorized and directed to publish this memorandum in the Federal Register.


Source: The Department of Labor:

Source, :

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