The New Fiduciary Rule (9): What is An Investment? (Part 1)


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The US Department of Labor has released its package of proposed changes to the regulation defining nondiscretionary fiduciary advice and to the exemptions for conflicts and compensation for investment recommendations to retirement plans, participants (including rollovers), and IRAs.

The proposed regulation redefines fiduciary status for “investment” recommendations. But what is an investment recommendation? The answer: More than you think.

Key Takeaways

  • The Department of Labor’s proposed fiduciary “package” includes new definitions of nondiscretionary fiduciary investment advice.
  • Of course, fiduciary status depends on a recommendation to a retirement investor about “investments”. The proposed regulation has an expansive definition of an investment recommendation.
  • Broker-dealers, investment advisers, and insurance companies, and their representatives, need to understand the range of recommendations that are covered by the fiduciary standards.
  • That is particularly true (i) since one-time recommendations can result in fiduciary status and (ii) where the fiduciary investment recommendation involves a conflict of interest (e.g., a new fee or a commission), the firms and their representatives and agents will need to satisfy the conditions of either PTE 84-24 or PTE 2020-02.

This article begins a discussion of the definitions of “investments” that, if recommended to a retirement investor (that is, a private sector qualified plan, participants in those plans, or IRA owners), will require satisfaction of the fiduciary standards and, in many cases, of the conditions of a prohibited transaction exemption.

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The New Fiduciary Rule (8): Special Issues—Robo Advice and Investment Education


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The U.S. Department of Labor has released its package of proposed changes to the regulation defining fiduciary advice and to the exemptions for conflicts and compensation for investment advice to plans, participants (including rollovers), and IRAs (including transfers).

Key Takeaways

  • The Department of Labor’s proposed regulation defining fiduciary investment and insurance advice to private sector retirement plans, participants in those plans, and IRA owners (collectively, “retirement investors”) includes three distinct definitions.
  • While the current version of PTE 2020-02 does not extend relief for prohibited transactions resulting from robo advice (that is, it requires a human intermediary), the proposal would extend the PTE’s protections to conflicts of interest (that is, prohibited transactions) so long as the conditions of the exemption are satisfied.
  • Some commenters have suggested that the new definitions of fiduciary status and of covered transactions are so broad that investment education would be considered fiduciary advice. To be polite, that is an exaggeration.

My last post, The New Fiduciary Rule (7), discuss the “non-discretionary” definition of fiduciary investment advice in the DOL’s proposed fiduciary regulation. The other two definitions of fiduciary status are covered by my posts The New Fiduciary Rule (5) and The New Fiduciary Rule (6).

The proposed definition of non-discretionary fiduciary advice is a material change from the current regulation because it eliminates the 5-part test, including the requirement that advice be given to the particular retirement investor on a “regular basis.” In other words, a one-time recommendation can be fiduciary advice under this definition. (The definition is somewhat more demanding that just “one-time advice,” but I will refer to it as one-time advice for purposes of this article. If you want to know more about the detailed definition, look at my last post.)

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ERISA Moments Ep. 9: Who is a Fiduciary? The Proposal’s Three Definitions of Fiduciary


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Take a quick dive into the exciting world of ERISA with Faegre Drinker benefits and executive compensation attorneys Fred Reish and Brad Campbell.

In this quick-hit series of updates, Fred and Brad offer a high-level view of current trends and recent ERISA developments. See the newest episode, Who is a Fiduciary? The Proposal’s Three Definitions of Fiduciary, on the Spotlight on Benefits blog.

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The New Fiduciary Rule (7): Non-Discretionary Investment Advice


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The U.S. Department of Labor has released its package of proposed changes to the regulation defining fiduciary advice and to the exemptions for conflicts and compensation for investment advice to plans, participants (including rollovers), and IRAs (including transfers).

Key Takeaways

  • The Department of Labor’s proposed regulation defining fiduciary investment and insurance advice to private sector retirement plans, participants in those plans, and IRA owners (collectively, “retirement investors”) includes three distinct definitions.
  • Those definitions are discretionary investment management, non-discretionary investment advice, and acknowledgement of fiduciary status.
  • The most controversial of these proposals is the new definition of non-discretionary investment advice. If an investment adviser, broker-dealer, or insurance agent (“investment professional”) satisfies that definition, the investment professional will be a fiduciary under ERISA and the Internal Revenue Code.

This post discusses the “non-discretionary” definition of fiduciary investment advice in the DOL’s proposed fiduciary regulation. The other two definitions of fiduciary status are covered by my posts The New Fiduciary Rule (5) and The New Fiduciary Rule (6).

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The New Fiduciary Rule (6): The Fiduciary Definition of Fiduciary


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The US Department of Labor has released its package of proposed changes to the regulation defining fiduciary advice and to the exemptions for conflicts and compensation for investment advice to plans, participants (including rollovers), and IRAs (including transfers of IRAs).

Key Takeaways

  • The Department of Labor’s proposed regulation defining fiduciary investment and insurance/annuity advice to private sector retirement plans, participants in those plans, and IRA owners (collectively, “retirement investors”) includes three distinct definitions.
  • Those definitions are: discretionary investment management, non-discretionary investment advice, and acknowledgement of fiduciary status. In each of those cases, the person and the firm will be fiduciaries under ERISA and the Internal Revenue Code for purposes of their investment recommendations and services to retirement investors.
  • A new definition in the proposal, and one that is not likely to be controversial, is the third one….a person will be a fiduciary for investment recommendations if that person says that the person and/or the firm are acting as fiduciaries for the recommendation.

This post discusses the “fiduciary acknowledgement” definition of fiduciary investment advice in the DOL’s proposed fiduciary regulation. More specifically, the proposed regulation says that a person will be an ERISA and Code fiduciary if “The person making the recommendation represents or acknowledges that they are acting as a fiduciary when making investment recommendations.” (There will be future articles discussing “investment recommendations”, but for the moment, consider it to be a recommendation for a retirement investor to invest in securities, insurance or other property.)

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ERISA Moments Ep. 8: The New Fiduciary Proposal: PTE 84-24 and the Obligations of Insurance Companies


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Take a quick dive into the exciting world of ERISA with Faegre Drinker benefits and executive compensation attorneys Fred Reish and Brad Campbell. In this quick-hit series of updates, Fred and Brad offer a high-level view of current trends and recent ERISA developments.

Watch the newest episode, The New Fiduciary Proposal: PTE 84-24 and the Obligations of Insurance Companies, on the Spotlight on Benefits blog.

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The New Fiduciary Rule (5): Discretionary Investment Management


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The US Department of Labor has released its package of proposed changes to the regulation defining nondiscretionary fiduciary advice and to the exemptions for conflicts and compensation for investment recommendations to retirement plans, participants (including rollovers), and IRAs.

Key Takeaways

  • The Department of Labor’s proposed regulation defining fiduciary investment and insurance advice to private sector retirement plans, participants in those plans, and IRA owners (collectively, “retirement investors”) includes three distinct definitions.
  • Those definitions are discretionary investment management, nondiscretionary investment advice, and acknowledgement of fiduciary status.
  • The least controversial definition is that, when an investment professional provides investment management, or discretionary, services to retirement investors, the investment professional will be a fiduciary under ERISA and the Internal Revenue Code.

This post discusses the “discretionary” definition of fiduciary investment advice in the DOL’s proposed fiduciary regulation.

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The New Fiduciary Rule (4): A Relationship of Trust and Confidence


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The US Department of Labor has released its package of proposed changes to the regulation defining nondiscretionary fiduciary advice and to the exemptions for conflicts and compensation for investment recommendations to retirement plans, participants (including rollovers), and IRAs.

Key Takeaways

    • The Department of Labor’s proposed fiduciary “package” includes a new definition of nondiscretionary fiduciary investment advice.
    • In overturning the Obama-era fiduciary regulation, the 5th Circuit Court of Appeals said that the DOL’s definition of nondiscretionary fiduciary advice failed to define a relationship of “trust and confidence”. In the view of the court, fiduciary status only applied to financial recommendations made by an advisor who had a relationship of trust and confidence with an investor.
    • In drafting the new proposed fiduciary regulation, the Department of Labor considered that holding and made an effort to define nondiscretionary advice in a manner consistent with a trust and confidence standard.

This article discusses the DOL’s proposed definition of nondiscretionary advice and the comments in the preamble about relationships of trust and confidence.

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ERISA Moments Ep. 7: The New Fiduciary Proposal: PTE 84-24 and the Significant Disclosure Obligations


ERISA, fiduciary

Take a quick dive into the exciting world of ERISA with Faegre Drinker benefits and executive compensation attorneys Fred Reish and Brad Campbell. In this quick-hit series of updates, Fred and Brad offer a high-level view of current trends and recent ERISA developments.

See the newest episode, The New Fiduciary Proposal: PTE 84-24 and the Significant Disclosure Obligations, on the Spotlight on Benefits Blog.

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