Discover the DOL Rule’s current standing and recent developments which have made the Mutual Fund industry unsure of what will be required to comply.
On April 8, 2016, the Department of Labor (DOL) released the final regulations that expand the definition of the term fiduciary under the Employee Retirement Income Security Act of 1974 (ERISA) and section 4975 of the Internal Revenue Code (or, the DOL Rule). The DOL Rule has a direct impact on registered investment advisors, broker-dealers, registered representatives and other advisors in the retail marketplace. While the direct compliance obligation is on these entities, there is also a significant indirect impact to mutual fund transfer agents. They will need to enhance their systems and modify their operations as mutual funds adapt to the needs of the intermediaries who sell those products.
Over the course of this year, there have been a number of developments with the regulation, making many in the industry unsure of what will be required to comply with the DOL Rule. Here is a recap:
The FAQs provide additional information and guidance on matters that may arise during the transition period timeframe. The FAQs covered a myriad of issues, including but not limited to:
As it relates to possible changes to the DOL Rule, the DOL indicated in the FAQs that it is:
The enforcement policy states that the DOL will not pursue claims against fiduciaries who are working diligently and in good faith to comply with the fiduciary rule and exemptions, nor will it treat fiduciaries as being in violation of the DOL Rule or PTEs during the transition period.
Many in the industry expect that these delays will ultimately lead to changes to the requirements that will be established by the DOL. Until those requirements are known, mutual funds, their transfer agents, and the intermediaries who sell mutual funds, will need to contend with uncertainty regarding their potentially significant future compliance obligations.
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Vice President, Transfer Agent Regulatory Management, BNY Mellon Asset Servicing
Charles S. Hawkins is a Vice President in the Transfer Agent Regulatory Management Department at BNY Mellon’s asset servicing group which is responsible for coordinating the delivery of regulatory services to transfer agency clients. Mr. Hawkins’s responsibilities include the design and implementation of compliance solutions for new or amended regulations.View Profile