Category: prohibited transaction


Interesting Angles on the DOL’s Fiduciary Rule #56

Posted on July 31, 2017, by Fred Reish in DOL Activity, fiduciary, prohibited transaction. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #56

The Department of Labor has reversed its position on the issues discussed in the article below. Angles article #58 explains the changes.

Recommendations of Contributions as Fiduciary Advice

This is my 56th article about interesting observations concerning the Department of Labor’s fiduciary rule and exemptions. These articles also cover the DOL’s FAQs interpreting the regulation and exemptions and related developments in the securities laws.

The Department of Labor’s Request for Information on the fiduciary rules and exemptions focuses on a number of issues that became apparent as financial institutions and advisers work to comply with the new requirements. One of these, which is addressed in the RFI, but which has not been generally discussed, is that a recommendation of a contribution, or of increased contributions, to plans and IRAs is a fiduciary act. As a result, if the recommended contribution causes higher compensation … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #53

Posted on June 28, 2017, by Fred Reish in BICE, Broker-Dealers, DOL Activity, fiduciary, prohibited transaction, prudent. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #53

The Fiduciary Rule and Discretionary Investment Management

This is my 53rd article about interesting observations concerning the Department of Labor’s fiduciary rule and exemptions. These articles also cover the DOL’s FAQs interpreting the regulation and exemptions and related developments in the securities laws.

In recent conversations I have learned that many broker-dealers and RIAs do not understand how the prohibited transaction rules and exemptions (and, particularly, the Best Interest Contract Exemption) apply differently to discretionary accounts and non-discretionary accounts. This article discusses some of those differences.

One similarity, though, is that ERISA’s prudent man rule and duty of loyalty apply for both discretionary and non-discretionary advice to retirement plans and participants.

However, ERISA does not generally govern investment advice to IRAs. As a result, absent the need for a prohibited transaction exemption, advisers to IRAs will not be governed by fiduciary/best interest standard of … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #50

Posted on June 6, 2017, by Fred Reish in BICE, Broker-Dealers, DOL Activity, fiduciary, prohibited transaction, prudent, Registered Investment Advisers, RIA. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #50

The Fourth Impartial Conduct Standard

This is my 50th article about interesting observations concerning the Department of Labor’s fiduciary rule and exemptions. These articles also cover the DOL’s FAQs interpreting the regulation and exemptions and related developments in the securities laws.

When the Department of Labor announced that the fiduciary rule and the transition exemptions would apply on June 9, it also issued a non-enforcement policy and a set of Frequently Asked Questions (FAQs) and Answers. The FAQs are titled “Conflict of Interest FAQs (Transition Period).”

For the most part, the FAQs are benign and helpful. However, FAQ 6 raises some significant issues for broker-dealers and RIA firms. In relevant part, FAQ 6 states:

During the transition period, the Department expects financial institutions to adopt such policies and procedures as they reasonably conclude are necessary to ensure that advisers comply with the … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #49

Posted on May 31, 2017, by Fred Reish in 408(b)(2), Broker-Dealers, DOL Activity, fiduciary, prohibited transaction, prudent, Registered Investment Advisers, RIA, Service Providers. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #49

The Requirement to Disclose Fiduciary Status

This is my 49th article about interesting observations concerning the Department of Labor’s fiduciary rule and exemptions. These articles also cover the DOL’s FAQs interpreting the regulation and exemptions and related developments in the securities laws.

When the new fiduciary rule applies on June 9, it will convert most non-fiduciary advisers into fiduciaries.

While there is not a disclosure requirement for new fiduciary advisers to IRAs, there is for these newly minted fiduciary advisers to plans. But it’s not part of the new regulation. Instead the requirement is found in the 408(b)(2) regulation which was effective in 2012.

As background, that regulation required that service providers to ERISA-governed retirement plans, including advisers, make written disclosures to plan fiduciaries of their services, compensation and “status.” The status requirement was that service providers disclose if they were fiduciaries under ERISA … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #48

Posted on May 25, 2017, by Fred Reish in BICE, Broker-Dealers, DOL Activity, fiduciary, prohibited transaction, prudent. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #48

The Last Word: The Fiduciary Rule Applies on June 9

This is my 48th article about interesting observations concerning the Department of Labor’s fiduciary rule and exemptions. These articles also cover the DOL’s FAQs interpreting the regulation and exemptions and related developments in the securities laws.

The Department of Labor has announced that it will not further delay the application of the fiduciary rule. As a result, the new fiduciary definition and the “transition” exemptions will apply to investment and insurance advice to plans, participants and IRA owners (“Retirement Investors” of “qualified accounts”) on June 9.

When the DOL announced its decision, it also issued additional guidance, in the form of FAQs and a non-enforcement policy.

For the most part, the FAQs were helpful.

For example, they clarify that certain types of information and conversation are educational, rather than fiduciary. However, FAQ #6 appears to have … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #46

Posted on May 10, 2017, by Fred Reish in BICE, DOL Activity, fiduciary, prohibited transaction, prudent. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #46

How Does an Adviser Know How to Satisfy the Best Interest Standard?

This is my 46th article about interesting observations concerning the Department of Labor’s fiduciary rule and exemptions. These articles also cover the DOL’s FAQs interpreting the regulation and exemptions and related developments in the securities laws.

Beginning on June 9, the new “transition” exemptions will apply to investment and insurance (e.g., annuities) recommendations for IRAs. If an adviser and his supervisory entity (the “financial institution”) are “pure” level fee fiduciaries, there will not be a prohibited transaction under the Internal Revenue Code (so long as the fees are reasonable). Two consequences flow from that. First, the adviser and entity will not need to use the Best Interest Contract Exemption (BICE), which means that they will not be bound by the best interest standard of care. Second, their services to the … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #45

Posted on May 2, 2017, by Fred Reish in BICE, Broker-Dealers, DOL Activity, fiduciary, prohibited transaction, Registered Investment Advisers. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #45

The DOL Fiduciary “Package”: Basics on the Prohibited Transaction Exemptions

This is my 45th article about interesting observations concerning the Department of Labor’s fiduciary rule and exemptions. These articles also cover the DOL’s FAQs interpreting the regulation and exemptions and related developments in the securities laws.

My last post (Angles #44) discussed the requirements of ERISA’s prudent man rule and of the best interest standard of care for IRAs and plans. This article outlines the requirements of the two prohibited transaction exemptions that will apply to recommendations of investment products and services and insurance products to plans, participants and IRAs (“qualified accounts”). Those two exemptions are:

Prohibited Transaction Exemption 84-24 (which covers recommendations of insurance products, including annuities and life insurance policies). This “transition” 84-24 has been amended to cover all types of annuities (group and individual, variable, fixed rate and fixed index) … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #44

Posted on April 26, 2017, by Fred Reish in BICE, Broker-Dealers, DOL Activity, fiduciary, prohibited transaction, prudent. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #44

The Basic Structure of the Fiduciary Package (June 9)

This is my 44th article about interesting observations concerning the Department of Labor’s fiduciary rule and exemptions. These articles also cover the DOL’s FAQs interpreting the regulation and exemptions and related developments in the securities laws.

This article focuses on the fiduciary rule; next week I will discuss two of the exemptions, the Best Interest Contract Exemption and 84-24.

As we all know by now, the DOL’s new fiduciary definition applies on June 9. As a result the following recommendations will be fiduciary acts on and after June 9:

Recommendations of investments, investment strategies, insurance and annuities, investment managers, other fiduciaries, distributions and rollovers, and IRA transfers;
Recommendations to ERISA plans, participants or IRA owners.

Fiduciary recommendations to plans and participants (including rollover recommendations) will be subject to ERISA’s prudent man rule and duty of loyalty and, … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #43

Posted on April 19, 2017, by Fred Reish in BICE, Broker-Dealers, DOL Activity, fiduciary, prohibited transaction, Registered Investment Advisers, RIA, SEC. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #43

BICE Transition: More Than the Eye Can See

This is my 43rd article about interesting observations concerning the Department of Labor’s fiduciary rule and exemptions. These articles also cover the DOL’s FAQs interpreting the regulation and exemptions and related developments in the securities laws.

As we all know by now, the new, and greatly expanded, definition of fiduciary advice becomes applicable on June 9. That means that almost any investment or insurance recommendation to a plan, participant, or IRA will be a fiduciary act. (The definition of investment recommendations is also very broad, including referrals to investment managers, recommendations to take distributions from plans, and recommendations to transfer IRAs.)

As a result, investment and insurance recommendations to participants and plans must be prudently developed and must be loyal to the plan or participant. But, recommendations to IRAs will not be subject to the … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #41

Posted on March 22, 2017, by Fred Reish in DOL Activity, fiduciary, prohibited transaction, prudent. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #41

While We Wait: The Current Fiduciary Rule and Annuities

This is my 41st article about interesting observations concerning the Department of Labor’s fiduciary rule and exemptions. These articles also cover the DOL’s FAQs interpreting the regulation and exemptions and related developments in the securities laws.

As explained in previous posts, the delay of the new fiduciary rule does not mean that we are “rule-less.” Instead, the “old” rule, and exemptions, which have been place for decades, will continue to apply. Does that mean that we are back in the “good old days” where we won’t need to pay attention to the application of the fiduciary rule to IRAs?  I don’t think so.

Over the past few years, a tremendous amount of attention has been paid to the meaning and consequences of being a fiduciary . . . and I doubt that we can … Read More »




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