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On April 4, 2017, the Department of Labor issued a final rule delaying the applicability date of its “fiduciary rule” and related exemptions to June 9, 2017.1 The delay also provides that (1) reliance on the Best Interest Contract Exemption and the Principal Transaction Exemption will only require adhering to the Impartial Conduct Standards during the transition period of June 9 through January 1, 20182 and (2) advisors can continue to rely on PTE 84-24 until January 1, 2018, subject to adhering to the Impartial Conduct Standards beginning June 9th.3
In addition, the DOL’s comment period on questions posed in the President’s Memorandum of February 3rd will end on April 17, 2017.4 The President’s Memorandum mandated further study of the effects of the fiduciary rule on the retail retirement market.
The sixty-day delay strikes a calibrated balance between the many constituencies tracking the rule, while giving the DOL more time to consider the issues raised in the President’s Memorandum.
The original April 10th applicability date was problematic for financial firms, as many firms have slowed their compliance under the assumption that the rule would be delayed. For investors, the DOL seems to have concluded that early effectiveness of some of the provisions of the fiduciary overall is better than no protection at all. As a result, beginning on June 9th, fiduciary status will apply to many financial advisors, and these advisors will be required to adhere to the Impartial Conduct Standards. In the absence of further action by the DOL, Congress or the Courts, the original rule, including the requirement to enter into a “Best Interest Contract” and the availability of a private right of action, will come into force on January 1, 2018.
The Impartial Conduct Standards require advisors to:
Although a breach of these standards may not lead to a private right of action by the retirement investors (unless the retirement investor is a participant in an ERISA plan), it may lead to excise taxes under the Code or a civil action by the DOL. Both the DOL and the IRS, however, have stated that in the period before January 1, 2018 and for some time after, they will focus on compliance assistance, rather than penalties, for financial institutions and advisors who are working diligently and in good faith to understand and come into compliance with the new rules and exemptions.6
It continues to be unclear what financial organizations must do during the transition period to comply with the Impartial Conduct Standards, particularly in situations where brokers are receiving variable compensation. Also unclear is the fate of some of the new investment products, including lower cost share classes with no “trails” or sub-transfer fees, that were intended to facilitate the movement from commission-based to advisory service models.
Further, any rule revising or repealing the “fiduciary rule” will be difficult to implement, as it will be subject to the Administrative Procedures Act (“APA”), which requires that action can only be taken “[a]fter consideration of the relevant matter presented”7 during a period of public comment. In making changes, the DOL will have to address the findings that led to the promulgation of the rule and will have to take into account that many financial organizations have already invested heavily in compliance.
Congress may weigh in directly on the fiduciary rule through legislation. Earlier this year, Congressman Joe Wilson introduced a bill to delay the rule’s implementation date by two years from enactment of the legislation. A separate bill, the Financial Choice Act (“FCA”), would eliminate the fiduciary rule and prevent the DOL from promulgating a new rule until the date that is 60 days after the SEC issues a final rule relating to standards of conduct for brokers and dealers pursuant to Section 15 of the Securities Exchange Act of 1934. The FCA, which passed the House Financial Services Committee last September, is expected to be reintroduced, shortly. The revised version of the bill will provide, among other things, that any rule promulgated by the DOL must adhere to a substantially similar standard to the standard promulgated by the SEC.
The fiduciary rule has been upheld in three separate court decisions.8 Although notices of appeal have been filed and a challenge is still pending in Minnesota,9 it is becoming apparent that a judicial outcome in favor of the rule’s opponents is unlikely.
The fiduciary rule has already had a major impact on the retail retirement market. A number of financial organizations have revised their product line-ups, their approach to compensating client-facing advisors and their relationship with product providers. Financial organizations have spent a tremendous amount of time and dollars to prepare for full compliance, and proponents of the rule and other consumer advocates are not likely to allow the rule to die without a meaningful replacement or a meaningful fight. All of that suggests that the next nine months will be a crucial period in the DOL’s long history of trying to expand ERISA’s coverage to IRAs and other retail products.
 The final rule, can be found at: https://www.gpo.gov/fdsys/pkg/FR-2017-04-07/pdf/2017-06914.pdf. The fiduciary rule can be found at: http://webapps.dol.gov/FederalRegister/PdfDisplay.aspx?DocId=28806. For a complete overview of the final rule, you may wish to refer to our client publication: “The US Department of Labor’s Final ‘Fiduciary’ Rule Incorporates Concessions to Financial Service Industry but Still Poses Key Challenges,” available at: http://www.shearman.com/~/media/Files/NewsInsights/Publications/2016/04/The-US-Department-of-Labor-Final-Fiduciary-Rule-Incorporates-Concessions-to-Financial-Service-Industry-CGE-041416.pdf.
 Both the BIC Exemption and the Principal Transaction Exemption provided that full compliance would not be required until January 1, 2018. During the transition period, however, fiduciaries had to comply with three conditions. These conditions were: (1) adherence to the Impartial Conduct Standards, (2) the requirement of financial institutions to provide a written notice acknowledging its and its advisors’ fiduciary status and stating that it and its advisors will comply with the Impartial Conduct Standards and disclose material conflicts of interest and (3) the financial institutions must disclose any material conflicts of interest and whether it receives third-party payments or recommends proprietary products. As a result of the final rule released on April 4th, only the first condition will be required during the transition period.
 PTE 84-24 provides an exemption for transactions involving insurance and annuity contracts. In April of 2016, the exemption was amended to require compliance with the Impartial Conduct Standards and to revoke relief for transactions involving fixed indexed annuity contracts and variable annuity contracts as of April 10, 2017. Advisors recommending these products would have to rely on the BIC Exemption.
 For a discussion of the memorandum, you may wish to refer to our client publication: “President Trump Mandates Reconsideration of DOL’s ‘Fiduciary’ Rule,” available at: http://www.shearman.com/en/newsinsights/publications/2017/02/reconsideration-of-dol-fiduciary-rule.
 This language is similar to the prudent man standard of ERISA (29 USC 1104) with the addition of the language at the end that reads: “without regard to the financial or other interests of the advisor, financial institution or any affiliate, related entity, or other party.”
 See the final rule, 82 FR 16905-16906, IRS Announcement 2017-04 (March 27, 2017), EBSA Field Assistance Bulletin 2017-01 (March 10, 2017) and the DOL’s Conflict of Interest FAQs (Part I Exemptions) (Oct. 27, 2016).
 See 5 USC § 553(c). Although the APA contains a “good cause” exception to the notice and comment requirement, an agency must find that the use of these procedures is “impracticable, unnecessary, or contrary to the public interest” (5 USC 553(b)(B)). These exceptions have been narrowly applied by the courts and are unlikely to apply with respect to the fiduciary rule.
 See Market Synergy Group, Inc. v. US Department of Labor, et al., 2017 BL 49586 (D. Kan. Feb. 17, 2017); Chamber of Commerce of the US, et. al. v. Hugler, et al., 2017 BL 38365 (N.D. Tex. February 8, 2017) and The National Association for Fixed Annuities v. Perez, et. al., 2016 BL 369523 (D.D.C. Nov. 4, 2016)
 See Thrivent Financial for Lutherans v. Perez et al, Docket No. 16-cv-03289 (D.Minn. Sept. 29, 2016).