The new fiduciary standard is set to begin on June 9. Are you ready?

On Tuesday, April 4, 2017, the Department of Labor finalized a delay to the applicability date of the Fiduciary Rule until June 9, 2017

Introduction

Following President Trump’s February 3, 2017 memorandum (the “Presidential Memorandum”)1 directing the Department of Labor (DOL) to prepare an “updated economic and legal analysis concerning the likely impact” of its “Conflict of Interest Rule” on fiduciary investment advice (the “Rule”) and related prohibited transaction exemptions (PTEs), the DOL finalized a delay to the initial applicability date of the Rule until June 9, 2017.2

The DOL also delayed the initial applicability date of the Best Interest Contract (BIC) Exemption, the Class Exemption for Principal Transactions, and amendments to other previously granted exemptions until June 9, 2017.  The applicability date of the Impartial Conduct Standards in these exemptions is extended until June 9, 2017, while compliance with other conditions for transactions covered by these exemptions (e.g., specific disclosures and representations of fiduciary compliance in written communications with investors) is not required until January 1, 2018.3

In addition, the DOL delayed the initial applicability of amendments to PTE 84-24 for certain insurance companies and agents until January 1, 2018 (other than the Impartial Conduct Standards, which will be applicable on June 9, 2017).

The DOL argued that these extensions are necessary to enable it to examine whether the Rule may adversely affect the ability of Americans to gain access to retirement information and financial advice, and to prepare the updated economic and legal analysis pursuant to the Presidential Memorandum.  The extensions will also allow the DOL to “consider possible changes with respect to the Rule and PTEs based on new evidence or analysis developed pursuant to the examination.”4

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Department of Labor issues proposal to delay Fiduciary Rule

On Thursday, March 2, 2017, the Department of Labor published a proposal that would delay the Fiduciary Rule by 60 days; comments will be accepted until March 17, 2017

Introduction

On February 3, 2017, President Donald J. Trump issued a memorandum (the “Presidential Memorandum”) directing the Department of Labor (DOL) to examine its “Conflict of Interest Rule” on fiduciary investment advice (the “Rule”) and related prohibited transaction exemptions (PTEs) to “determine whether it may adversely affect the ability of Americans to gain access to retirement information and financial advice.”1 The Presidential Memorandum also raised concerns that the Rule “may not be consistent with the policies of [the] Administration.”

The Presidential Memorandum did not directly delay or order a delay in the Rule’s initial April 10, 2017 applicability date, but directed the DOL to prepare an “updated economic and legal analysis concerning the likely impact” of the Rule.

If the DOL makes an affirmative determination pursuant to these considerations or if it concludes for any other reason that the Rule is inconsistent with the priorities outlined in the Presidential Memorandum, it is directed to publish a proposed rule to rescind or revise the Rule, as appropriate and consistent with law.

On March 2, 2017, the DOL published in the Federal Register a proposed rule that would extend the applicability date of the Rule and PTEs for 60 days (i.e., until June 9, 2017) to allow the DOL to “address questions of law and policy.”2

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Exam priorities for securities firms in 2017

The Securities and Exchange Commission (SEC) and Financial Industry Regulatory Authority (FINRA) recently released their annual examination priorities for 2017.  Although the regulators independently develop their areas of focus, there are six overlapping priorities that securities firms may want to address in the near term.

The SEC’s priorities are organized around three thematic areas (two of which, the first and third, were included in 2015 and 2016):  (1) protecting retail investors; (2) focusing on risks specific to elderly and retiring investors; and (3) analyzing issues related to market-wide risks.

FINRA’s high-level focus will be on:  (1) high-risk and recidivist brokers; (2) sales practices; (3) financial risks, including liquidity risk and compliance with recently effective amendments to Rule 4210 (Margin Requirements); (4) operational risks, including cybersecurity; and (5) market integrity.

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SEC approves the CAT National Market System Plan

On November 15, 2016, the Securities and Exchange Commission (SEC) approved the National Market System (NMS) Plan governing the creation and operation of the Consolidated Audit Trail (CAT), capping four years of development by the 21 self-regulatory organizations (SROs) responsible for implementing the CAT.1 The CAT NMS Plan will require broker-dealers conducting business in the US equity and options markets to report all transactions—including orders, quotes, executions, cancels, allocations, and sensitive customer and account information—to a central repository.

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Top regulatory trends for 2016 in Securities

In the long wake of the global financial downturn, regulators continue to push for greater transparency, efficiency, and stability in our nation’s securities markets. Top improvement priorities include investor and consumer protection, risk management standards, and preparation for technology/cyber threats.

Deloitte recently published a report that examines nine key regulatory trends for the securities industry in 2016. In some of these areas, the regulatory requirements have been clarified over the past year and companies are now focusing on compliance and refinement. In other areas, regulations are still emerging or evolving and companies are looking for clues to help them prepare. Here are selected highlights: Continue reading “Top regulatory trends for 2016 in Securities”

Across industries, 2016 shapes up as a year of regulatory transformation

Posted by Christopher Spoth, Executive Director, Deloitte Center for Regulatory Strategies, on February 19, 2016

Each year, the Deloitte Center for Regulatory Strategies publishes a series of outlooks on what the coming year may bring. Each one focuses on regulatory challenges that are unique to a particular industry. But perhaps the greatest lessons I find in them are the challenges that aren’t unique—the priorities that will likely shape the next 12 months for business leaders everywhere.

What do I see in 2016? A year of transformation. New tools are changing the ways regulators define their jobs. Organizations that recognize the changes have an opportunity to apply several lessons to their regulatory strategies:

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