First set of FAQs on fiduciary rule coming 'very soon,' but deadline extension 'not likely': DOL's Borzi

Broker-dealers will perhaps in a matter of days receive answers to some compliance questions, in the first of several FAQ tranches expected by year-end

Oct 25, 2016 @ 11:38 am

By Greg Iacurci

The Labor Department is poised to release its first wave of answers to frequently asked questions about its fiduciary rule “very soon,” Phyllis Borzi, assistant secretary of labor at the department's Employee Benefits Security Administration, said Tuesday morning.

“This first set of FAQs will focus on some of the questions that have been raised in connection with the exemptions, because that's what people need to figure out,” according to Ms. Borzi, the main architect of the rule.

While that's likely to appease broker-dealers and their advisers, who have been hungry for guidance on how to comply with some provisions of the rule, Ms. Borzi also dealt a bit of a blow to the industry, saying an extension of the April implementation deadline is “not likely.”

“But I'll never say never,” Ms. Borzi said in a keynote address at the 2016 ASPPA annual Conference in National Harbor, Md.

The initial tranche of FAQs is one of several rounds the DOL intends to release to help broker-dealers, advisers and the broader financial services industry make sense of a complex regulatory package.

“We intend to do probably, right now we're thinking three sets of FAQs,” Ms. Borzi said. “Hopefully we'll be able to get all of those three sets of regulations out within, certainly before the end of the year.”

Ms. Borzi didn't provide a specific timeline for the initial round, but also didn't dismiss a question that they could be released in a matter of days. She said the DOL is prioritizing FAQs based on what stakeholders want answers to most.

The first FAQs will focus on the rule's exemptions, such as the best-interest contract exemption (BICE) and prohibited transaction exemption (PTE) 84-24, which allow advisers to receive forms of compensation it views as conflicted, such as commissions, if certain standards are met.

The following round of FAQs, which “probably aren't going to be all that far behind” the first, will focus on “the definitional questions of the rule itself,” Ms. Borzi said.

“We already have another set of exemption kind of questions, miscellaneous questions,” she added, referencing an envisioned third tranche.

Ms. Borzi declined to give examples of the types of questions the DOL is seeking to answer.

The FAQs follow on clarifications to the regulation the DOL issued in July, which were technical in nature and largely cleaned up typos and syntax errors.

Ms. Borzi also reiterated the DOL's stance that the agency wouldn't be focused on assessing penalties for noncompliance with the rule within the first few years of it being in force. Rather, the DOL would home in on helping firms to comply, she said.

While enforcement in the IRA market would initially come via the contract mechanism built into BICE, which allows retirement investors to bring class-action litigation against financial institutions, the DOL will “probably have some audit program” in the long term, but not in the foreseeable future, Ms. Borzi said.


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