A prominent fiduciary expert is predicting that the January 1,2018 scheduled compliance date for the Labor Department’s fiduciary rule’s prohibited transactionexemptions will be delayed for up to a year.

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Writing in a blog post, Fred Reish, chair of the financialservices ERISA Team at Drinker Biddle & Reath, said the extentof the review of the rule being undertaken by the Labor Departmentand the requirements of the Administrative Procedures Act make ithighly unlikely that a revised regulation will be finalized beforethe beginning of next year.

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Related: What advisors need to know now about theDOL fiduciary rule

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Labor is expected to formally publish a request for informationfor input on the rule’s impact on industry and what changes may beneeded. Specifically, Labor is looking for feedback on two of therule’s primary prohibited transaction exemptions: the Best InterestContract Exemption, and Prohibited Transaction Exemption 84-24,both slated for implementation on January 1 of next year.

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Labor is also seeking input from the Securities and Exchange Commission, which hasissued its own request for information on how the agency shouldcommence with rulemaking addressing broker-dealer conflicts ofinterest.

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“My view is that it will be virtually impossible for the DOL andSEC to collaborate on the development of a common, or at leastcompatible, definition of fiduciary advice and standard of carebefore December 31,” writes Reish.

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Under the APA, a revised regulation would have to be publishedin the Federal Register by early November, meaning its proposedform would have to be made public by early to mid-September,according to Reish.

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Meeting those deadlines “seems almost impossible,” thinks Reish,given the call for coordination between Labor and SEC, and the factthat the SEC has not previously proposed guidance on a newindustry-wide fiduciary standard.

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Currently, advisors on IRAs and defined contribution assets arerequired to abide by the rule’s impartial conduct standards, perthe expanded definition of fiduciary investment advice that wentinto effect on June 9.

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As the current rule was finalized, industry was afforded atransition period until January 1, 2018, before it was required tocomply with the BIC Exemption and PTE 84-24. Compliance with thoseexemptions is expected to dramatically reshape how mutual funds,variable annuities, and fixed indexed annuities are sold toindividuals holding qualified retirement accounts.

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Impartial conduct standards likely here to stay

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A potential extension of the transition period would undoubtedlybe welcomed by much of industry, as compliance with the BICExemption and amended PTE 84-24 is expected to be painstaking for alarge swath of the regulated community. Reish expects that“significant changes” to the exemptions will emerge from Labor’sanalysis of the rule.

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But he also suggests that the rule’s most ardent opponentsshould brace for the reality that the expanded definition offiduciary advice, and the impartial conduct standards industry isnow beholden to, are here to stay.

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“By a year from now, financial services companies will be incompliance with the fiduciary standard and fiduciary advice willbecome the standard course of business,” writes Reish. “Thefiduciary standard will have become the norm.”

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And that will make it much more difficult for Labor to revisethe rule’s fiduciary definition and standard of care requirementsunder the impartial conduct standards, says Reish.

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Reish predicts Labor will announce an extension of thetransition period by September.

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Related: See more DOL Fiduciary Rulecoverage

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Nick Thornton

Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.