• by PCS
  • 10/28/2016

DOL FAQ Guidance Released

The U.S. Department of Labor (DOL) has published Frequently Asked Questions (FAQs) in connection with the DOL’s new fiduciary rule.  These FAQs are the first installment in a series of FAQs that will be published in the coming months that seek to answer questions from the financial services industry and general public to clarify issues related to the new DOL fiduciary rule.  According to Phyllis C. Borzi, Assistant Secretary of Labor for Employee Benefits Security, “These questions are an important part of the regulatory process as they allow the department to clarify important parts of the rule, and head off misunderstandings that could lead to bad results for retirement savers, or financial services professionals.”
The FAQs address questions like the following:
How will the Labor Department approach implementation of the new rule and exemptions during the period when financial institutions and advisers are coming into compliance?
The full Best Interest Contract Exemption provides that financial institutions cannot “use or rely upon quotas, appraisals, performance or personnel actions, bonuses, contests, special awards, differential compensation or other actions or incentives that are intended or would reasonably be expected to cause Advisers to make recommendations that are not in the Best Interest of the Retirement Investor.” Does this provision categorically preclude financial institutions from paying higher commission rates to advisers based on volume (that is, by using an escalating grid under which the percentage commission paid to the adviser increases at certain thresholds)?
When do firms and their advisers have to comply with the conditions of the new Best Interest Contract Exemption and Principal Transactions Exemption?
If you have a question regarding the new fiduciary rule that you would like answered, you can ask the DOL directly.
Please stay tuned as we will publish new information as we receive additional guidance.