We are issuing the latest update to our recent Alerts regarding the final rules issued by the Department of Labor (“DOL”) with respect to fiduciaries under the Employee Retirement Income Security Act of 1974 (“ERISA”) and the DOL’s Best Interest Contract Exemption (“BICE”) from ERISA’s prohibited transactions provisions as well as Congress’s attempts at blocking implementation of the ERISA fiduciary rule and BICE. On September 13, 2016, the Republican-controlled House Financial Services Committee approved by a vote of 30 to 26 legislation which would among other things prohibit enforcement of the ERISA fiduciary rule and BICE. The legislation blocking enforcement of the ERISA fiduciary duty rule and BICE is part of a much larger bill known as the “Financial CHOICE (Creating Hope and Opportunity for Investors, Consumers and Entrepreneurs) Act of 2016” (H.R. 5983). The bill was introduced into the House by Rep. Jeb Hensarling (R-Tx), the Chairman of the House Financial Services Committee. The text of the proposed legislation can be found here. The portion of H.R. 5983 relating to the ERISA fiduciary rule and BICE is contained in Section 441. Section 441(a) of the Financial CHOICE Act of 2016, entitled “Repeal of Department of Labor Fiduciary Rule,” provides that “The final rule of the Department of Labor titled ‘Definition of the Term ‘Fiduciary’; Conflict of Interest Rule -- Retirement Investment Advice’ and related prohibited transaction exemptions published April 8, 2016 (81 Fed. Reg. 20946) shall have no force or effect.” The bill also restricts the DOL from promulgating any replacement fiduciary rule until after the Securities and Exchange Commission issues its final rule on this subject. Section 441(b) provides that “[a]fter the date of enactment of this Act, the Secretary of Labor shall not prescribe any regulation under the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1001 et seq.) defining the circumstances under which an individual is considered a fiduciary until the date that is 60 days after the Securities and Exchange Commission issues a final rule relating to standards of conduct for brokers and dealers pursuant to the second subsection (k) of section 15 of the Securities Exchange Act of 1934 (15 U.S.C. 78o(k).” It is unknown when the Financial CHOICE Act of 2016 will be voted on by the full House. There is no companion bill currently pending in the Senate.
Alert
09.14.2016