The DOL recently issued its final regulation on conflicted investment advice to participants. Unfortunately, the scope of the regulation is not well understood. For example, if an adviser does not have any conflicts (that is, if the adviser cannot vary its revenue or that of any affiliates based on the recommended investments), then the adviser does not need to comply with the new regulation. For example, the adviser would not need to comply with the certification or audit requirements. However, if the adviser has financial conflicts of interest and can affect its own revenues (or those of an affiliate), then the adviser must comply with those requirements in order to give fiduciary investment advice to participants.
Together with other attorneys from my law firm, I have written a bulletin on the subject. If you are interested in having further information, please click on the linke below to see a copy of the bulletin:
The DOL issued the final 408(b)(2) regulation on February 2, 2012.
Key points are:
- The extension of the effective date to July 1, 2012;
- The fact that service providers are not required to provide a summary of the disclosures, though the DOL provided a sample “guide” that is not mandatory;
- The addition of a requirement to describe the arrangement between a covered service provider and the payer of indirect compensation;
- Clarification that electronic transmission of the disclosures is permitted;
- Relief from the disclosure requirements for “frozen” 403(b) contracts;
- A new requirement that plan sponsors terminate the relationship with a service provider who fails or refuses to provide information on request;
- Limited relief for disclosures for brokerage accounts and similar arrangements.
Bruce Ashton and I have drafted a more detailed Alert for our law firm, Drinker Biddle & Reath LLP. That Alert is located at: