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DOL Fiduciary News: March 31, 2017

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DOL fiduciary rule supporters question agency's quick read of comment letters before sending final delay to OMB

InvestmentNews; Mar 30, 2017 @ 2:20 pm

Supporters of the Department of Labor's fiduciary rule are questioning whether the agency actually read the more than 1,000 comment letters it received on delaying the measure before it took a major step to do so earlier this week.

The comment period on the delay, which would push back the implementation date of the fiduciary regulation from April 10 to June 9, ended on March 17. The agency forwarded the final delay rule to the Office of Management and Budget on March 28. OMB must approve the delay.

The DOL is seeking the delay in order to conduct the review of the rule called for by President Donald Trump in a Feb. 3 memo. Mr. Trump told the agency to modify or repeal the regulation if it was found to curb access to financial advice for some investors and raise litigation risk for firms.

MassMutual to level 401(k) fees for its brokers

InvestmentNews; Mar 30, 2017 @ 2:11 pm

Massachusetts Mutual Life Insurance Co. is moving to level compensation brokers receive for working with 401(k) plans, a step other large brokerages have taken in response to the Department of Labor's fiduciary rule.

The firm, which has more than 9,000 advisers, said compensation must be the same for all funds in employer-sponsored retirement plans governed by the Employee Retirement Income Security Act of 1974, effective June 1.

Will ERISA preempt state law under the fiduciary rule?; March 30, 2017

The Labor Department’s fiduciary rule may give IRA investors access to jury trials in class action lawsuits, a right that has been denied to the vast majority of plaintiffs in class actions brought under the Employee Retirement Income Security Act.

Under the rule’s private right of action provision, IRA investors can bring class action claims if the Best Interest Contract Exemption—which includes a warranty guarantying a fiduciary standard of care for advice on IRA investments--is breached.

As a general matter, those claims will be brought under contract law in state courts, and not under ERISA, a federal statute that in most cases is deliberated in federal courts.

Joshua Lichtenstein, an attorney in the tax and benefits department of Ropes & Grey, says the fiduciary rule’s private right of action is causing industry stakeholders considerable worry.

Financial Services: Weighing the Strategic Tradeoffs of the Fiduciary Rule [Morningstar]

By Michael Wong, CFA, CPA, senior equity analyst

03-30-17 | 06:00 AM

The global financial sector is in the midst of financial advice moving toward a fiduciary-like standard and fees becoming more transparent. In Canada, Client Relationship Model Phase 2, or CRM2, which greatly increased fee disclosures and investment performance, has been fully phased in for more than six months, while the European Union's Markets in Financial Instruments Directive, or MiFID II, is set to take effect in January 2018.

In the United States, after an executive order from President Donald Trump, the Department of Labor has proposed to delay the applicability date of its conflict-of-interest rule in order to restudy the rule's costs and benefits. Regardless of when certain financial regulations are implemented, the ongoing shift in business models, financial products, and client demand will cause changes in profits and market share across the sector.

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