With the Labor Department’s new federal retirement-savings rule set to take effect in April, efforts to comply with the stepped-up regulation are under way across the adviser world.  There are also several lawsuits moving through the pipeline as some corners of the industry challenge the rule’s scope, though experts generally don’t predict any meaningful changes to the rule before compliance deadlines kick in.

Here are compliance deadlines and other matters related to the fiduciary rule:

OFFICIAL GUIDANCE.   The Labor Department has so far not issued formal guidance.The department aims to issue a list of FAQs sometime this fall, likely before Thanksgiving. Some firms that will be affected by the rule are taking proactive steps to address potential issues of conflict - e.g., Merrill Lynch has will end commission-based retirement accounts and instead charge investors a fee based on a percentage of assets;  Edward Jones has curtailed such commission-based accounts but not ended them entirely;  many other firms are awaiting the official Labor Department guidance before acting. 

LAWSUITS.     After unveiling its fiduciary rule in April, the Labor Department was hit with a number of lawsuits looking to rein in the reach of the rule or to reverse it completely.  One of the major lawsuits was filed by the National Association of Fixed Annuities, which is challenging the rule on several counts.

The suit is one of six brought against the Labor Department seeking to kill the rule or narrow its reach. Three of the cases were rolled into one and are currently in a Texas court, together contending that the rule would make advice too costly for some investors and too burdensome for advisers. There are 2 more-narrowly focused cases - one in Kansas and another recently filed suit in Minnesota.

The Supreme Court could, at any time, decide to take up the cases from the circuit courts, legal experts say.

POLITICS.    While some experts expect the SEC to eventually come out with its own fiduciary rule, the agency hasn’t yet been able to act amid a partisan divide among commissioners and a busy schedule writing rules related to the Dodd-Frank financial-industry overhaul.  A new president and a new commissioner could prioritize a fiduciary rule. Should the SEC pass its own rule, it likely would complement, not replace, the Labor Department’s rule. A rule from the SEC would cover non-retirement accounts, effectively covering the entire advisory world and adding another layer of fiduciary regulation for advisers.

IMPORTANT DATES.     11/17/16 is a hearing for the suit in the U.S. District Court for the Northern District of Texas is set for Nov. 17. The suit combines 9 plaintiffs including the U.S. Chamber of Commerce and SIFMA, and, like the National Association of Fixed Annuities case, it’s broad in scope.

Sometime in November the 3^rd major legal case, brought by Market Synergy Group, an insurance agency that specializes in annuities, will be heard.  This suit is challenging a revised version of the best-interest contract exemption, or BICE, which will allow certain advisers to conduct business as usual as long as they provide clients with a contract that clearly lays out any potential conflicts of interest. Market Synergy isn’t asking to change the rule or nix the new exemption and instead is arguing that advisers in the space should be able to remain exempt from fiduciary standards under the less strict exemption that has been the law since 1984.  Experts say there is no doubt that the losing party would immediately appeal the decision.

April 10, 2017 is when the first phase of the Labor Department rule goes into effect. 

By 1/1/18, firms must be fully compliant with the fiduciary rule.