Category Archives: broker-dealers

Best Interest Standard of Care for Advisors #71: Compliance with PTE 2020-02: Further Extension of Non-Enforcement Policy

This series focuses on the DOL’s new fiduciary “rule”, which was effective on February 16. This article looks at the Department of Labor’s recent extension of its non-enforcement policy regarding the conditions of Prohibited Transaction Exemption 2020-02….if the Impartial Conduct Standards are satisfied.

Key Takeaways

  • PTE 2020-02—sometimes referred to as fiduciary rule 3.0—was effective on February 16, 2021.
  • However, in the preamble to the PTE, the DOL extended its “non-enforcement policy” (Field Assistance Bulletin 2018-02) to December 20, 2021. That is, the DOL and IRS will not enforce the conditions of the exemption if financial institutions and investment professionals work “diligently and in good faith to comply with the Impartial Conduct Standards”.
  • In Field Assistance Bulletin (FAB) 2021-02, the DOL has extended the non-enforcement policy to January 31, 2022, and has extended, until June 30, 2022, its non-enforcement approach to the requirement to provide retirement investors with a written description of the “specific reasons” why a rollover recommendation is in the retirement investor’s best interest.
  • This article discusses the impact of the extension on (1) the conditions of PTE 2020-02, (2) the application of the expanded definition of fiduciary advice, including rollover recommendations, (3) the application to PTE 84-24 for insurance and annuity sales, and (4) the significance of the Impartial Conduct Standards in this context.

Background

The DOL’s prohibited transaction exemption (PTE) 2020-02 (Improving Investment Advice for Workers & Retirees), allows investment advisers, broker-dealers, banks, and insurance companies (“financial institu­tions”), and their representatives (“investment professionals”), to receive conflicted compensation resulting from non-discretionary fiduciary investment advice to ERISA retirement plans, participants and IRA owners (“retirement investors”). In addition, in the preamble to the PTE the DOL announced an expanded definition of fiduciary advice, meaning that many more financial institutions and investment professionals will be fiduciaries for their recommendations to retirement investors and, therefore, will need the protection provided by the exemption.

Continue reading Best Interest Standard of Care for Advisors #71: Compliance with PTE 2020-02: Further Extension of Non-Enforcement Policy

Share

Best Interest Standard of Care for Advisors #70: Compliance with PTE 2020-02: Factors to Evaluate for an IRA-to-IRA Rollover Recommendation (Part 6 on FAQ 15)

The Department of Labor’s “Fiduciary Rule,” PTE 2020-02: The FAQs

This series focuses on the DOL’s new fiduciary “rule”, which was effective on February 16. This, and the next several, articles look at the Frequently Asked Questions (FAQs) issued by the DOL to explain the fiduciary definition and the exemption for conflicts of interest.

Key Takeaways

  • The DOL FAQs generally explain PTE 2020-02 and the expanded definition of fiduciary advice.
  • In FAQ 15, the DOL discusses the factors to be considered for a “rollover” recommendation. While most of the articles in this Best Interest series have focused on plan-to-IRA rollovers, the DOL’s definition of “rollover” includes a transfer—or rollover—from an IRA to another IRA. This article discusses IRA-to-IRA “rollover” recommendations.
  • The requirement that a rollover recommendation satisfy the best interest standard of care has applied since February 16. The DOL non-enforcement policy delays the enforcement of the conditions of PTE 2020-02, but does not delay the fiduciary definition.

Background

The DOL’s prohibited transaction exemption (PTE) 2020-02 (Improving Investment Advice for Workers & Retirees), allows investment advisers, broker-dealers, banks, and insurance companies (“financial institu­tions”), and their representatives (“investment professionals”), to receive conflicted compensation resulting from non-discretionary fiduciary investment advice to ERISA retirement plans, participants and IRA owners (“retirement investors”). In addition, in the preamble to the PTE the DOL announced an expanded definition of fiduciary advice, meaning that many more financial institutions and investment professionals will be fiduciaries for their recommendations to retirement investors and, therefore, will need the protection provided by the exemption.

Continue reading Best Interest Standard of Care for Advisors #70: Compliance with PTE 2020-02: Factors to Evaluate for an IRA-to-IRA Rollover Recommendation (Part 6 on FAQ 15)

Share

Best Interest Standard of Care for Advisors #67: Compliance with PTE 2020-02: Factors to Evaluate for a Rollover Recommendation (Part 3)

The DOL “Fiduciary Rule,” FAQ 15: Factors to Evaluate for a Rollover Recommendation (Part 3)

This series focuses on the DOL’s new fiduciary “rule”, which was effective on February 16. This, and the next several, articles look at the Frequently Asked Questions (FAQs) issued by the DOL to explain the fiduciary definition and the exemption for conflicts of interest.

Key Takeaways

  • The DOL FAQs generally explain PTE 2020-02 and the expanded definition of fiduciary advice.
  • FAQ 15 explains the DOL’s opinion on the factors to be considered in the process of determining whether a rollover recommendation is in the best interest of a plan participant. In order to obtain relief from the prohibited transaction that results from a rollover recommendation where the financial institution and the investment professional are fiduciaries for the recommendation, the Impartial Conduct Standards must be satisfied during the period from February 16, 2021 until December 20, 2021 under the DOL’s non-enforcement policy (with concurrence by the IRS), and then on December 21, all of the conditions of PTE 2020-02 must be satisfied.
  • However, the requirement that a rollover recommendation satisfy the best interest standard of care is not delayed until December 21, since the Impartial Conduct Standards require that a financial institution and an investment professional satisfy the best interest standard of care. FAQ 15 explains the DOL’s view on what is required to do that.

Background

The DOL’s prohibited transaction exemption (PTE) 2020-02 (Improving Investment Advice for Workers & Retirees) allows investment advisers, broker-dealers, banks, and insurance companies (“financial institutions”), and their representatives (“investment professionals”), to receive conflicted compensation resulting from non-discretionary fiduciary investment advice to retirement plans, participants and IRA owners (“retirement investors”). In addition, in the preamble to the PTE the DOL announced an expanded definition of fiduciary advice, meaning that many more financial institutions and investment professionals will be fiduciaries for their recommendations to retirement investors and, therefore, will need the protection provided by the exemption.

In April, the DOL issued FAQs that explain the fiduciary interpretation and the conditions of the exemption.

Continue reading Best Interest Standard of Care for Advisors #67: Compliance with PTE 2020-02: Factors to Evaluate for a Rollover Recommendation (Part 3)

Share

Interest Standard of Care for Advisors #66: Compliance with PTE 2020-02: Factors to Evaluate for a Rollover Recommendation (Part 2)

The DOL “Fiduciary Rule,” FAQ 15: Factors to Evaluate for a Rollover Recommendation (Part 2)

This series focuses on the DOL’s new fiduciary “rule”, which was effective on February 16. This, and the next several, articles look at the Frequently Asked Questions (FAQs) issued by the DOL to explain the fiduciary definition and the exemption for conflicts of interest.

Key Takeaways

  • The DOL FAQs generally explain PTE 2020-02 and the expanded definition of fiduciary advice.
  • FAQ 15 explains the DOL’s opinion on the factors to be considered in the process of determining whether a rollover recommendation is in the best interest of a plan participant.
  • In order to obtain relief from the prohibited transaction that results from a rollover recommendation where the financial institution and the investment professional are fiduciaries for the recommendation, the Impartial Conduct Standards must be satisfied during the period from February 16, 2021 until December 20, 2021 under the DOL’s non-enforcement policy (with concurrence by the IRS), and then on December 21, all of the conditions of PTE 2020-02 must be satisfied.
  • However, the requirement that a rollover recommendation satisfy the best interest standard of care is not delayed until December 21, since the Impartial Conduct Standards require that a financial institution and an investment professional satisfy the best interest standard of care. FAQ 15 explains the DOL’s view on what is required to do that.

Background

The DOL’s prohibited transaction exemption (PTE) 2020-02 (Improving Investment Advice for Workers & Retirees) allows investment advisers, broker-dealers, banks, and insurance companies (“financial institutions”), and their representatives (“investment professionals”), to receive conflicted compensation resulting from non-discretionary fiduciary investment advice to retirement plans, participants and IRA owners (“retirement investors”). In addition, in the preamble to the PTE the DOL announced an expanded definition of fiduciary advice, meaning that many more financial institutions and investment professionals will be fiduciaries for their recommendations to retirement investors and, therefore, will need the protection provided by the exemption.

In April, the DOL issued FAQs that explain the fiduciary interpretation and the conditions of the exemption.

Continue reading Interest Standard of Care for Advisors #66: Compliance with PTE 2020-02: Factors to Evaluate for a Rollover Recommendation (Part 2)

Share

Best Interest Standard of Care for Advisors #65: Compliance with PTE 2020-02: Factors to Evaluate for a Rollover Recommendation (Part 1)

The DOL “Fiduciary Rule,” FAQ 15: Factors to Evaluate for a Rollover Recommendation

This series focuses on the DOL’s new fiduciary “rule”, which was effective on February 16. This, and the next several, articles look at the Frequently Asked Questions (FAQs) issued by the DOL to explain the fiduciary definition and the exemption for conflicts of interest.

Key Takeaways

  • The DOL FAQs generally explain PTE 2020-02 and the expanded definition of fiduciary advice.
  • FAQ 15 explains the DOL’s opinion on the factors to be considered in the process of determining whether a rollover recommendation is in the best interest of a plan participant.
  • In order to obtain relied from the prohibited transactions that result from a rollover recommendation where the financial institution are fiduciaries for the recommendation, the Impartial Conduct Standards must be satisfied from February 16, 2021 until December 20, 2021 under the DOL’s non-enforcement policy (with concurrence by the IRS), and then on December 21, all of the conditions of PTE 2020-02 must be satisfied.
  • However, the requirement that a rollover recommendation satisfy the best interest standard of care is not delayed until December 21, since the Impartial Conduct Standards require that a financial institution and an investment professional satisfy the best interest standard of care. FAQ 15 explains the DOL’s view on what is required to do that.

Background

The DOL’s prohibited transaction exemption (PTE) 2020-02 (Improving Investment Advice for Workers & Retirees) allows investment advisers, broker-dealers, banks, and insurance companies (“financial institutions”), and their representatives (“investment professionals”), to receive conflicted compensation resulting from non-discretionary fiduciary investment advice to retirement plans, participants and IRA owners (“retirement investors”). In addition, in the preamble to the PTE the DOL announced an expanded definition of fiduciary advice, meaning that many more financial institutions and investment professionals will be fiduciaries for their recommendations to retirement investors and, therefore, will need the protection provided by the exemption.

Continue reading Best Interest Standard of Care for Advisors #65: Compliance with PTE 2020-02: Factors to Evaluate for a Rollover Recommendation (Part 1)

Share

Best Interest Standard of Care for Advisors #64: Compliance with PTE 2020-02: Disclosure of Conflicts of Interest

The DOL “Fiduciary Rule,” FAQ 14: Disclosure of Conflicts of Interest

This series focuses on the DOL’s new fiduciary “rule”, which was effective on February 16. This, and the next several, articles look at the Frequently Asked Questions (FAQs) issued by the DOL to explain the fiduciary definition and the exemption for conflicts of interest.

Key Takeaways

  • The DOL FAQs generally explain PTE 2020-02 and the expanded definition of fiduciary advice.
  • FAQ 14 explains that, to obtain the relief provided by the PTE, financial institutions must disclose to “retirement investors” the conflicts of interest related to any recommendations.
  • The Impartial Conduct Standards, which do not require disclosure of conflicts, must be satisfied from February 16, 2021 until December 20, 2021 under the DOL’s non-enforcement policy (with concurrence by the IRS), and then on December 21, all of the conditions of PTE 2020-02 must be satisfied, including the disclosure of conflicts.

Background

The DOL’s prohibited transaction exemption (PTE) 2020-02 (Improving Investment Advice for Workers & Retirees) allows investment advisers, broker-dealers, banks, and insurance companies (“financial institutions”), and their representatives (“investment professionals”), to receive conflicted compensation resulting from non-discretionary fiduciary investment advice to retirement plans, participants and IRA owners (“retirement investors”). In addition, in the preamble to the PTE the DOL announced an expanded definition of fiduciary advice, meaning that many more financial institutions and investment professionals will be fiduciaries for their recommendations to retirement investors and, therefore, will need the protection provided by the exemption.

In April, the DOL issued FAQs that explain the fiduciary interpretation and the conditions of the exemption.

Continue reading Best Interest Standard of Care for Advisors #64: Compliance with PTE 2020-02: Disclosure of Conflicts of Interest

Share

Best Interest Standard of Care for Advisors #63: Compliance with PTE 2020-02: Acknowledgement of Fiduciary Status

The DOL “Fiduciary Rule,” FAQ 13: Written Acknowledgement of Fiduciary Status

This series focuses on the DOL’s new fiduciary “rule”, which was effective on February 16. This, and the next several, articles look at the Frequently Asked Questions (FAQs) issued by the DOL to explain the fiduciary definition and the exemption for conflicts of interest.

Key Takeaways

  • The DOL FAQs generally explain PTE 2020-02 and the expanded definition of fiduciary advice.
  • FAQ 13 explains the DOL’s reasons for requiring that financial institutions and investment professionals provide retirement investors with a written acknowledgement of their status as fiduciaries for their recommendations.
  • The Impartial Conduct Standards, which do not require the declaration of fiduciary status, must be satisfied from February 16, 2021 until December 20, 2021 under the DOL’s non-enforcement policy (with concurrence by the IRS), and then on December 21, all of the conditions of PTE 2020-02 must be satisfied, including the fiduciary acknowledgement.

Background

The DOL’s prohibited transaction exemption (PTE) 2020-02 (Improving Investment Advice for Workers & Retirees) allows investment advisers, broker-dealers, banks, and insurance companies (“financial institutions”), and their representatives (“investment professionals”), to receive conflicted compensation resulting from non-discretionary fiduciary investment advice to retirement plans, participants and IRA owners (“retirement investors”). In addition, in the preamble to the PTE the DOL announced an expanded definition of fiduciary advice, meaning that many more financial institutions and investment professionals will be fiduciaries for their recommendations to retirement investors and, therefore, will need the protection provided by the exemption.

In April, the DOL issued FAQs that explain the fiduciary interpretation and the conditions of the exemption.

Continue reading Best Interest Standard of Care for Advisors #63: Compliance with PTE 2020-02: Acknowledgement of Fiduciary Status

Share

Best Interest Standard of Care for Advisors #62: Compliance with PTE 2020-02: Conflicted Compensation

The DOL “Fiduciary Rule,” FAQ 12: PTE 2020-02 and Conflicted Compensation

This series focuses on the DOL’s new fiduciary “rule”, which was effective on February 16. This, and the next several, articles look at the Frequently Asked Questions (FAQs) issued by the DOL to explain the fiduciary definition and the exemption for conflicts of interest.

Key Takeaways

  • The DOL FAQs generally explain PTE 2020-02 and the expanded definition of fiduciary advice.
  • FAQ 12 explains that, if the conditions of the exemption are satisfied, financial institutions and investment professionals can receive conflicted compensation resulting from fiduciary recommendations to “retirement investors”, including IRA owners.
  • The Impartial Conduct Standards, must be satisfied from February 16, 2021 until December 20, 2021 under the DOL non-enforcement policy (with concurrence by the IRS), and then on December 21, all of the conditions of PTE 2020-02 must be satisfied.

Background

The DOL’s prohibited transaction exemption (PTE) 2020-02 (Improving Investment Advice for Workers & Retirees) allows investment advisers, broker-dealers, banks, and insurance companies (“financial institutions”), and their representatives (“investment professionals”), to receive conflicted compensation resulting from non-discretionary fiduciary investment advice to retirement plans, participants and IRA owners (“retirement investors”). In addition, in the preamble to the PTE the DOL announced an expanded definition of fiduciary advice, meaning that many more financial institutions and investment professionals will be fiduciaries for their recommendations to retirement investors and, therefore, will need the protection provided by the exemption.

In April, the DOL issued FAQs that explain the fiduciary interpretation and the conditions of the exemption.

This article discusses FAQ 12—a DOL question and answer about the receipt of compensation resulting from recommendations to retirement investors.

Continue reading Best Interest Standard of Care for Advisors #62: Compliance with PTE 2020-02: Conflicted Compensation

Share

Best Interest Standard of Care for Advisors #61: Interim Compliance with PTE 2020-02: The Impartial Conduct Standards

The DOL “Fiduciary Rule,” FAQ 11: The Impartial Conduct Standards

This series focuses on the DOL’s new fiduciary “rule”, which was effective on February 16. This, and the next several, articles look at the Frequently Asked Questions (FAQs) issued by the DOL to explain the fiduciary definition and the exemption for conflicts of interest.

Key Takeaways

  • The DOL FAQs generally explain PTE 2020-02 and the expanded definition of fiduciary advice.
  • FAQ 11 discusses the Impartial Conduct Standards, which must be satisfied from February 16, 2021 until December 20, 2021 under the DOL non-enforcement policy (with concurrence by the IRS), and then on December 21, the Impartial Conduct Standards become one of the conditions of full compliance with PTE 2020-02.

Background

The DOL’s prohibited transaction exemption (PTE) 2020-02 (Improving Investment Advice for Workers & Retirees) allows investment advisers, broker-dealers, banks, and insurance companies (“financial institutions”), and their representatives (“investment professionals”), to receive conflicted compensation resulting from non-discretionary fiduciary investment advice to retirement plans, participants and IRA owners (“retirement investors”). In addition, in the preamble to the PTE the DOL announced an expanded definition of fiduciary advice, meaning that many more financial institutions and investment professionals will be fiduciaries for their recommendations to retirement investors and, therefore, will need the protection provided by the exemption.

In April, the DOL issued FAQs that explain the fiduciary interpretation and the conditions of the exemption.

This article discusses FAQ 11—a DOL question and answer about the Impartial Conduct Standards. The Impartial Conduct Standards must be satisfied between February 16 and December 20 to obtain the relief afforded by the DOL’s non-enforcement policy. After December 20, the Impartial Conduct Standards must still be satisfied…as one of the conditions in PTE 2020-02.

Continue reading Best Interest Standard of Care for Advisors #61: Interim Compliance with PTE 2020-02: The Impartial Conduct Standards

Share

Best Interest Standard of Care for Advisors #51

The Department of Labor’s “Fiduciary Rule,” PTE 2020-02 (Part 16): Mitigation Strategies


This series focuses on the DOL’s new fiduciary “rule”. This post is the 16th in a subseries discussing special compliance issues related to the rule. This article looks at compliance with the rule’s mitigation requirements, with particular emphasis on broker-dealers and investment advisers.


On February 16, 2021, the DOL’s prohibited transaction exemption (PTE) 2020-02 became effective. (Improving Investment Advice for Workers & Retirees) It allows investment advisers, broker-dealers, banks, and insurance companies (“financial institutions”), and their representatives (“investment professionals”), to receive conflicted compensation resulting from non-discretionary fiduciary investment advice to retirement plans, participants and IRA owners (“retirement investors”).

In the preamble to the PTE, the DOL announced an expanded definition of fiduciary advice, meaning that many more financial institutions and investment professionals will be fiduciaries and therefore will need the protections afforded by the exemption. They will also need to satisfy the best interest standard of care. The relief provided by the exemption is conditional, that is, the “conditions” in the exemption must be satisfied to obtain relief from the prohibited transaction rules in ERISA and the Internal Revenue Code. For the period from February 16 until December 20, a DOL and IRS non-enforcement policy based on the Impartial Conduct Standards will be available.

Continue reading Best Interest Standard of Care for Advisors #51

Share