Category: prohibited transaction


Interesting Angles on the DOL’s Fiduciary Rule #89

Posted on May 7, 2018, by Fred Reish in BICE, DOL Activity, fiduciary, prohibited transaction, Recordkeeper, SEC. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #89

The 5th Circuit Decision, Prohibited Transactions, and New Non-Enforcement Policies

This is my 89th article about interesting observations concerning the Department of Labor’s (DOL) fiduciary rule and exemptions. These articles also cover the DOL’s FAQs interpreting the regulation and exemptions and related developments in the securities laws.

On Monday, May 7th, the Department of Labor and the Internal Revenue Service issued non-enforcement policies for prohibited transactions that resulted from the 5th Circuit Court of Appeals vacating the Fiduciary Rule. While it is well-understood that the 5th Circuit threw out the expanded definition of fiduciary advice, it is not as well known that the 5th Circuit also vacated the exemptions that were associated with the fiduciary regulation. As a result of the loss of the exemptions, including the Best Interest Contract Exemption (BICE), many advisors (including their broker-dealers and RIAs) have inadvertently engaged … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #87

Posted on April 16, 2018, by Fred Reish in BICE, DOL Activity, fiduciary, prohibited transaction, prudent, Registered Investment Advisers, RIA, SEC. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #87

The Fiduciary Rule: What’s Next (Part 3)?

This is my 87th article about interesting observations concerning the Department of Labor’s (DOL) 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 is the third of my four-part series on the critical questions raised by the 5th Circuit Court of Appeals decision to “vacate,” or throw out, the Fiduciary Rule. The first article, Angles #85, discusses the three critical questions for the SEC and DOL to answer. The second article, Angles #86, discussed the first critical question, “Who is a fiduciary?”

This post covers the second critical question, “What is the fiduciary standard of care?”

For purposes of advice to retirement plans and participants, that’s an easy answer. It’s ERISA’s prudent man rule and duty of loyalty. That standard is … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #85

Posted on April 3, 2018, by Fred Reish in BICE, Broker-Dealers, DOL Activity, FINRA, prohibited transaction, Registered Investment Advisers, RIA, SEC. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #85

The Fiduciary Rule: What’s Next (Part 1)?

This is my 85th article about interesting observations concerning the Department of Labor’s (DOL) fiduciary rule and exemptions. These articles also cover the DOL’s FAQs interpreting the regulation and exemptions and related developments in the securities laws.

By now, it’s common knowledge that the 5th Circuit Court of Appeals has thrown out the fiduciary rule. That includes the regulation expanding the definition of fiduciary advice and the related prohibited transaction exemptions, for example, the Best Interest Contract Exemption (BICE). At the same time, the SEC is working on a new “best interest” standard of care, and the DOL is working on amending the fiduciary regulation and related exemptions.

That raises the critical questions . . . where are we now and where are we going?

Let’s start by looking at the issues that the DOL and … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #84

Posted on March 27, 2018, by Fred Reish in BICE, Broker-Dealers, DOL Activity, fiduciary, Plan Sponsors, prohibited transaction, prudent. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #84

What Does the 5th Circuit Decision Mean for Rollover Recommendations?

This is my 84th article about interesting observations concerning the Department of Labor’s (DOL) 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 5th Circuit Court of Appeals has “vacated” the DOL’s fiduciary rule and exemptions. What does that mean for recommendations to participants that they take plan distributions and rollover to IRAs?

It means a lot . . . in some cases.

But before discussing that, it’s important to note that the decision isn’t applicable yet. At the earliest, it will take effect on May 7. However, if the DOL contests that decision and the courts “stay”–or block—it as the hearings and appeals take place, it may not apply for a year or more . . . or … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #83

Posted on March 15, 2018, by Fred Reish in DOL Activity, prohibited transaction, SEC, Uncategorized. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #83

Part 2 of Undisclosed (and Disclosed) 12b-1 Fees

This is my 83rd article about interesting observations concerning the Department of Labor’s (DOL) 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 last week’s post (Angles #82) I discussed the fiduciary and prohibited transaction rules that should be considered in light of the SEC’s “Share Class Selection Disclosure Initiative” (“SCSDI”). As a refresher, the SCSD Initiative is a self-correction and self-reporting program where RIAs can identify, correct and report failures to adequately disclose the receipt of 12b-1 fees in addition to their advisory fees. My article discussed the consequences under the DOL’s guidance for the receipt of 12b-1 fees—on top of advisory fees—for both non-discretionary investment advice and discretionary investment management, where the results are quite different.

This article … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #81

Posted on February 27, 2018, by Fred Reish in BICE, Broker-Dealers, DOL Activity, fiduciary, prohibited transaction, Registered Investment Advisers, RIA. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #81

The Fiduciary Rule Prohibits Commissions . . . or Not (Myth #6)

This is my 81st article about interesting observations concerning the Department of Labor’s (DOL) 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 is another in my series of articles about myths concerning the Fiduciary Rule. The myth for this post is the oft-repeated statement that the Fiduciary Rule prohibits the payment of commissions.

Before getting into the explanation, though, I should give you some background information. Under the prohibited transaction rules in ERISA, a fiduciary advisor cannot make a recommendation that causes a payment from a third party (for example, a 12b-1 fee or an insurance commission) or that directly increases the advisor’s compensation (for example, a commission on a securities transaction). While those ERISA … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #78

Posted on January 24, 2018, by Fred Reish in Broker-Dealers, DOL Activity, fiduciary, prohibited transaction, Registered Investment Advisers, RIA, Uncategorized. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #78

The Fiduciary Rule: Mistaken Beliefs (#3)

This is my 78th article about interesting observations concerning the Department of Labor’s (DOL) 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 fiduciary regulation has been in effect since June of last year — a period of over six months. As you might expect, we are seeing mistakes and misunderstandings about activities that can result in fiduciary status for advisors. This article covers one of those.

The myth for this Angles is that broker-dealers and RIAs, and their advisors, must only recommend the lowest cost investments, for example, mutual funds with the lowest expense ratios. That is not correct.

In fact, the DOL has explained that:

“Consistent with the Department’s prior interpretations of this standard [the reasonable compensation standard], the Department … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #76

Posted on January 9, 2018, 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 #76

Discretionary Management of IRAs: Prohibited Transaction Issues for RIAs

This is my 76th article about interesting observations concerning the Department of Labor’s (DOL) 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 regulation defining fiduciary advice for plans, participants and IRAs applied on June 9, 2017. As a result, we now have some experience with the fiduciary regulation and the transition prohibited transaction exemptions. Based on that experience, there are some significant misunderstandings about how the rules work. This article discusses one of those.

If a broker-dealer or RIA firm receives prohibited (or “conflicted”) compensation from an IRA, the compensation may be permissible under the Best Interest Contract Exemption (BICE). During the transition period (until July 1, 2019), BICE only requires that fiduciary advisors (such as broker-dealers and … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #75

Posted on January 2, 2018, by Fred Reish in BICE, Broker-Dealers, DOL Activity, fiduciary, prohibited transaction, prudent, Registered Investment Advisers. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #75

The Fiduciary Rule: Mistaken Beliefs

This is my 75th article about interesting observations concerning the Department of Labor’s (DOL) 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 fiduciary regulation has been in effect since June of last year — a period of over six months. As you might expect, we are seeing mistakes and misunderstandings about activities that can result in fiduciary status for advisors. This article covers one of those.

In the past, there was a common belief among advisors that fiduciary status could be avoided by presenting a list of investments to plan sponsors. For example, an advisor might provide a list of three alternatives in each investment category (e.g., three alternatives for a large cap blend fund, three alternatives for a small cap fund, … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #65

Posted on October 11, 2017, by Fred Reish in BICE, DOL Activity, fiduciary, prohibited transaction, prudent. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #65

Unexpected Consequences of Fiduciary Rule

This is my 65th 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 fiduciary and best interest standards of care, as well as the prohibited transaction rules, will impact advisors in some unexpected ways. That is particularly true of investment advice to IRAs. Here is an example.

When plan or IRA assets are held by a custodian, an advisor often has the ability to recommend either transaction-fee (TF) mutual funds or no-transaction fee (NTF) mutual funds. The recommendation of either TF or NTF funds is a fiduciary act for plan assets, and it will be a best interest act for IRA assets—if the advisor or his or her firm receives any payments beyond a … Read More »




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