Analysts at PriceWaterhouse Coopers expect the Department of Labor to finalize its proposed fiduciary rule “early next year,” with the core framework of the proposal left intact, according to a regulatory brief published by the consultancy.
That is earlier than other prognostications, which have suggested a final rule would not emerge until the fall of 2016.
PwC expects the rule will transform existing business models and the competitive landscape for broker dealers.
But before it is finalized, the DOL will have significant work refining the proposal’s exemptions and carve outs.
Specifically, the Best Interest Contract Exemption, which will allow commission-based compensation on investment products so long as extensive disclosure requirements are met, will have to be adapted.
One of the more challenging requirements of the BIC exemption is the point of sale disclosure that requires one, five and 10-year cost projections on fees prior to the sale of the investment.
PwC expects the DOL to “simplify” that requirement before finalizing its rule, as it conflicts with existing securities regulations that prohibit sales communications that project, or predict future performance of investments.
But even if that provision of the BIC exemption is eliminated, broker dealers are still expected to face significant operational and technological challenges complying with other requirements on commission-based transactions.