Department of Labor’s Fiduciary Rule 3.0

As expected, the US Department of Labor has finalized its Proposal 3.0 on conflicted investment advice substantially as proposed. Key changes made by DOL from the proposal include:

• Tightening the circumstances in which DOL will treat rollover advice as fiduciary advice, effective February 16, 2021; 
• In PTE 2020-02, the new exemption for conflicted advice and certain principal transactions:
  • Narrowing the recordkeeping requirement to limit access to regulators, and not to plan fiduciaries and participants;
  • Permitting the certification of the retroactive compliance review to be made by any senior executive officer, as opposed to only by the CEO; and
  • Adding a self-correction provision; and
• Sunsetting its temporary enforcement policy regarding conflicted advice on December 20, 2021.

It is also expected, however, that the incoming Administration will reconsider and likely withdraw this guidance under a “midnight regulation” protocol. If so, the debate over this issue will extend well into its second decade.