Since we spoke about this issue in October, the Department of Labor has released FAQs on its fiduciary rule, including one Q&A addressing customer referrals to bank-affiliated broker-dealers under the “Best Interest Contract” exemption to the rule. However, this exemption still is considered too narrow by some, and its recordkeeping and contract compliance requirements remain burdensome.

Additionally, six lawsuits have been filed against the DOL in attempts to delay or defeat the fiduciary rule. In one case, the U.S. District Court for the District of Columbia rejected a motion for a preliminary injunction to halt its implementation. The other lawsuits and a new administration in the White House may result in a different outcome, but for now the rule remains intact. We recommend that financial institutions continue to work towards compliance with the rule by next April.

For resources related to our guidance, please see:

• Department of Labor, Conflict of Interest Exemptions FAQs, page 15 (October 27, 2016) (“Q20. The BIC Exemption provisions regarding Bank Networking Arrangements address referrals by banks and bank employees only to non-affiliated financial institutions such as registered investment advisers, insurance companies or broker dealers. Why isn’t relief provided for referrals to affiliates? Under the Rule, a recommendation of other persons to provide investment advice or investment management services constitutes fiduciary investment advice, and receipt of compensation as a result of such advice is a prohibited transaction requiring compliance with an exemption. In contrast, marketing oneself or an affiliate (when it is disclosed as such), without otherwise making an investment recommendation covered by the Rule, does not constitute investment advice that may result in a prohibited transaction. Referrals to affiliates who are providers of retail non-deposit investment products therefore generally would not be considered fiduciary investment advice giving rise to a prohibited transaction for which an exemption is required.”)

• Nat’l Ass’n for Fixed Annuities v. Perez, No. 16-1035 (D.D.C. Nov. 4, 2016), appeal filed (Nov. 28, 2016) (“For the reasons discussed above, the Court will deny NAFA’s motions for a preliminary injunction and for summary judgment . . . .”)