Home Alts News Department of Labor Issues Guidance on Fiduciary Rule

Department of Labor Issues Guidance on Fiduciary Rule

The Department of Labor’s Employee Benefits Security Administration has issued guidance relating to its exemption for investment advice fiduciaries.

The Department of Labor’s Employee Benefits Security Administration has issued guidance relating to its exemption for investment advice fiduciaries, dubbed Improving Investment Advice for Workers & Retirees, which went into effect on February 16th.

The DOL issued two documents that include information for retirement investors, employee benefit plans, and investment advice providers.

Choosing the Right Person to Give You Investment Advice: Information for Investors in Retirement Plans and Individual Retirement Accounts includes questions a retirement investor can ask when interviewing potential advice providers, background information to help them understand the purpose of each question, and investor-focused frequently asked questions about the exemption.

The other document is a set of compliance-focused frequently asked questions that provide guidance for investment advice providers who are relying, or planning to rely, on the exemption.

“The retirement investor guidance provides helpful information regarding the importance of selecting an investment advice provider who is a fiduciary and the protections that are provided to retirement investors under the Improving Investment Advice for Workers & Retirees exemption,” said Ali Khawar, acting assistant Secretary of Labor for Employee Benefits Security. “The compliance-focused frequently asked questions provide assistance to financial institutions and investment professionals as they ramp up compliance with the exemption.”

The Trump-era regulation replaces the previous iteration of the rule that was vacated by the Fifth Circuit Court of Appeals in 2018 for regulatory overreach and reinstates the Labor Department 1975 five-part test to determine who is a fiduciary. The rule states that the best interest standard in the exemption is “broadly aligned” with the Securities and Exchange Commission’s Regulation Best Interest, which went into effect on June 30, 2020.

A temporary enforcement policy (Field Assistance Bulletin 2018-02) issued by the DOL will remain in place until December 20, 2021.

In the FAB, the DOL stated it would not pursue prohibited transaction claims against investment advice fiduciaries who worked “diligently and in good faith” to comply with impartial conduct standards for transactions that would have been exempted in the new exemptions, or treat the fiduciaries as violating the prohibited transaction rules.

The impartial conduct standards have three components: A best interest standard; a reasonable compensation standard; and a requirement to make no misleading statements about investment transactions and other relevant matters.

The DOL said that it is continuing to review issues of fact, law and policy related to the exemption, and more generally, its regulation of fiduciary investment advice.

Click here to visit The DI Wire directory page.

image_pdf