Investment Advice

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Today, the U.S. Department of Labor will release its highly-anticipated Final Rule and Exemptions addressing when a person providing investment advice with respect to an employee benefit plan or individual retirement account is considered to be a “fiduciary” under the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code.  According to a Fact Sheet released in advance of the new rule’s publication, the “DOL has streamlined and simplified the rule to minimize the compliance burden and ensure ongoing access to advice, while maintaining an enforceable best interest standard that protects savers.”  According to the Fact Sheet:

  • The rule requires more retirement investment advisers to put their client’s best interest first, by expanding the types of retirement advice covered by fiduciary protections
  • The rule clarifies what does and does not constitute fiduciary advice
  • The exemptions will allow firms to accept common types of compensation – like commissions and revenue sharing payments – if they commit to putting their client’s best interest first
  • The rule and exemptions ensure that advisers are held accountable to their clients if they provide advice that is not in their clients’ best interest

On April 14, 2015, the U.S. Department of Labor (DOL) issued its highly anticipated re-proposed regulation addressing when a person providing investment advice with respect to an employee benefit plan or individual retirement account (IRA) is considered to be a fiduciary under the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code (Code).  As discussed below, the new proposal (available here) offers a general definition of fiduciary investment advice that would expand the group of people who would be considered fiduciaries.  The proposal contains a number of carve-outs for particular types of communications that the DOL does not consider to be fiduciary in nature.  The DOL also has proposed a new set of prohibited transaction exemptions and certain amendments to existing class exemptions applicable to fiduciaries that would allow certain broker-dealers, insurance agents and others who provide investment advice to continue to engage in certain transactions and to receive common forms of compensation that would otherwise be prohibited as conflicts of interest.