The Department of Labor on Monday said it wouldn't pursue enforcement actions against investment advice fiduciaries "who are working diligently and in good faith to comply" with requirements of the fiduciary rule that was recently overturned by a federal appeals court decision.
"The department is evaluating the need for other temporary or permanent prohibited transaction relief for investment advice fiduciaries, including possible prospective and retroactive prohibited transaction relief," said the DOL notice.
The DOL action is designed to provide relief to firms that might have changed their policies based on the enactment of the fiduciary rule by the Obama administration. However, the 5th U.S. Circuit Court of Appeals, in a 2-1 decision in March, struck down the entire rule, saying it represented a regulatory overreach by the Labor Department. At the time, the DOL announced it would not enforce the rule "pending further review."
The appeals court subsequently rejected a petition by AARP and attorneys general of three states to allow them to intervene in the case, and it rejected their request that the court's ruling be heard by all of the 5th Circuit judges. The DOL declined to appeal the case.
Prior to the court's rulings, the DOL notice acknowledged, "many financial institutions created and implemented compliance structures designed to ensure satisfaction" of certain "impartial conduct standards" contained in the original rule but whose implementation had been delayed until 2019 by the Trump administration.
"Financial institutions should be permitted to continue to rely upon the temporary enforcement policy, pending the department's issuance of additional guidance," the DOL notice said. "This temporary enforcement relief is appropriate and in the interest of plans, plan fiduciaries, plan participants and beneficiaries, IRAs and IRA owners."
