The Department of Labor in 2016, under the Obama administration, finalized what's commonly known as the fiduciary rule, which broadened the definition of when a person or entity was taking on fiduciary responsibilities and replaced the five-part test used to determine whether an investment professional or financial institution is a fiduciary. But in 2018, a three-judge panel at the 5th U.S. Circuit Court of Appeals in New Orleans vacated the rule in a 2-1 decision because it said the department exceeded its legal authority.
The Labor Department in 2018 then issued Field Assistance Bulletin 2018–02, which said the department would 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 would have been accepted under exemptions struck down in court.
The 2018 field assistance bulletin is slated to expire Dec. 20, the trade groups noted in their letter.
Extending the temporary enforcement policy by at least six to 12 months, "would allow firms a meaningful opportunity to provide feedback during the impending notice and comment period, the trade groups said. "Consumers would, of course, continue to be protected by FAB 2018-02 for as long as the temporary non-enforcement policy remains in effect, including the requirement that fiduciaries work diligently and in good faith to comply with impartial conduct standards."
The Chamber of Commerce, which filed the lawsuit against the Labor Department for its 2016 fiduciary rule, wrote a letter to the EBSA earlier this month also asking for an extension of the temporary enforcement policy.
In June, the Labor Department announced plans to issue a proposed rule that could broaden who's considered a fiduciary under the Employee Retirement Income Security Act. The rule-making would amend the regulatory definition of the term fiduciary "to more appropriately define when persons who render investment advice for a fee to employee benefit plans and (individual retirement accounts) are fiduciaries" within the meaning of the ERISA and the Internal Revenue Code, according to a Labor Department explanation.
The trade groups, staunch opponents of further investment-advice regulation, urged the EBSA to pause its rule-making plans. "It would provide an opportunity for all interested parties to observe and evaluate the real-world effectiveness of the current rules before deciding whether any additional changes are necessary," the groups said in the letter.