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Northwest OH Legal Blog

Wednesday, June 14, 2017

United States: Department of Labor's New Fiduciary Rule Became Effective June 9, 2017

The U.S. Department of Labor (DOL) has announced that the new fiduciary conflict of interest rule and related exemptions will begin taking effect on June 9, 2017. However, the DOL also announced a relaxed enforcement standard for the rest of 2017

The rule expands the “investment advice fiduciary” definition under the Employee Retirement Income Security Act of 1974 (ERISA). These fiduciary standards require advisers to adhere to a best interest standard when making investment recommendations, charge no more than reasonable compensation for their services and refrain from making misleading statements.

Pursuant to the DOL’s announcement, the new standard for when communications rise to the level of fiduciary advice will go into effect at 11:59 p.m. on June 9, 2017. After that date, service providers who are deemed to provide investment advice will be subject to ERISA's duties of prudence and loyalty, as well as ERISA's prohibited transaction rules. Examples would be suggesting a particular investment or strategy, or recommending a rollover

This is the first time that ERISA's requirements of prudence and loyalty will expressly apply for advisers to IRAs, HSAs, and other non-ERISA accounts that are subject to the prohibited transaction rules under the Internal Revenue Code. At this time, however, there will continue to be no private right of action against advisers to non-ERISA accounts for breach of the duty of prudence or loyalty. The consequence of non-compliance will be a self-reporting excise tax under Section 4975 of the Internal Revenue Code.

Between now and the end of the year, the DOL will continue to review the fiduciary rule and related exemptions. The DOL announced that it intends to publish a Request For Information and that it will be receptive to comments related to the new rule's requirements. The Secretary of Labor has also indicated that the DOL is hoping to collaborate with the Securities and Exchange Commission on a more uniform standard.

Through the end of 2017, the DOL says that it "will not pursue claims against fiduciaries who are working diligently and in good faith to comply with the fiduciary duty rule and exemptions, or treat those fiduciaries as being in violation of the fiduciary duty rule and exemptions." This relaxed enforcement standard is an example of the DOL's current emphasis on compliance rather than penalties.


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With offices in Toledo and Lima, OH Allotta Farley Co., L.P.A. serves clients throughout northwest OH with various legal matters. Areas of service include Allen County, Ashland County, Auglaize County, Crawford County, Defiance County, Erie County, Fulton County, Hancock County, Hardin County, Henry County, Huron County, Lucas County, Marion County, Mercer County, Morrow County, Ottawa County, Paulding County, Putnam County, Richland County, Sandusky County, Seneca County, Van Wert County, Williams County, Wood County, Wyandot County.

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