Fiduciary standards are verymuch alive, albeit in a state of transition and clarification.(Photo: Shutterstock)

The fiduciary rules governing investment advice by RegisteredInvestment Advisers (RIAs) and broker-dealers are currently in astate of transition.

The "DOL" prefix no longer applies — the 2017 Department ofLabor fiduciary standard, also known officially as the "Conflict ofInterest" rule, was repealed by a Federal court in 2018.

The "SEC" prefix also doesn't fit since the Securities andExchange Commission's (SEC) proposed "best-interest" rules are notexpected be finalized until late 2019.

Where fiduciary regulations stand

While it is hoped that a common set of DOL/SEC rules will berolled out by the end of next year, states are beginning to fillthe void with their own guidelines. Below is a brief summary ofwhere proposed fiduciary regulations currently stand:

DOL: The DOL's fiduciary rule was vacated bythe 5^th Circuit Court of Appeals in June 2018. The DOLannounced a temporary enforcement policy wherebyit will not pursue any actions "against investment advicefiduciaries who are working diligently and in good faith to complywith the impartial conduct standards for transactions that wouldhave been exempted" under the Best Interest Contract Exemption orthe Principal Transactions Exemption.

The DOL recently announced that it expects to release new advicerules by September 2019.

SEC: The SEC issued its proposed best-interestrules in April 2018, which would require broker-dealers to discloseconflicts of interest and to "exercise reasonable diligence, care,skill and prudence" to ensure they are selling products andcarrying out transactions that are in a client's best interest. Thedate for finalized SEC rules has also been scheduled for September2019.

State regulators: New Jersey Governor PhilMurphy recently announced a proposed fiduciary regulationto be overseen by the state's Bureau of Securities. The rule wouldcreate a uniform fiduciary standard for brokers and registeredinvestment advisers.

New Jersey is not expected to act alone on this, as states suchas Massachusetts, New York and California have also introduced, orare expected to introduce fiduciary regulations. The stateregulations are expected to focus on advice such as IRA rolloverrecommendations.

Stay tuned

Fiduciary standards are very much alive, albeit in a state oftransition and clarification. While the 5^th Circuit'sdecision was a setback for fiduciary rulemaking, follow-up actionsmay in time provide for a more comprehensive regulatory structureat the federal and state level.

NOTE: Information presented herein is for discussion andillustrative purposes only and is not a recommendation or an offeror solicitation to buy or sell any securities. Past performance isnot a guarantee of future results.

Fred Slade has over 25 years of experience inthe investment management and retirement services industries. He isSenior Director, Investments for Pentegra RetirementServices, a leading provider of retirement services tofinancial institutions and organizations nationwide, founded by theFederal Home Loan Bank System in 1943. Mr. Slade manages over $1billion in internal bond portfolios and provides analytics andstrategy for Pentegra's Defined Benefit and Defined ContributionPlans. Mr. Slade holds a Ph.D. in Economics from University ofPennsylvania and a CFA, and has presented at a number of seminarsand conferences.