Category Archives: DOL

Best Interest Standard of Care for Advisors #38


best interest, broker-dealers, DOL, fiduciary, investment adviser, IRA, prohibited transaction, reg BI, rollovers
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The Department of Labor’s Proposed Prohibited Transaction Exemption and Its Impact on Recommendations to Plans, Participants and IRAs (Part 3): Investment Adviser Considerations

On December 18, 2020, the DOL issued its final prohibited transaction exemption (PTE) that will allow conflicted compensation resulting from nondiscretionary fiduciary investment advice. The PTE is titled “Improving Investment Advice for Workers & Retirees.”  The citation is Prohibited Transaction Exemption 2020-02. The exemption is effective February 16, 2021.

The exemption and the associated expansion of the definition of fiduciary advice will have the greatest impact on recommendations by investment advisers and broker-dealers (1) to retirement plan participants about rollovers, and (2) to IRA owners about how to invest in their IRAs. This article focuses on the impact on investment advisers who recommend rollovers.

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Best Interest Standard of Care for Advisors #37


best interest, broker-dealers, DOL, fiduciary, investment adviser, IRA, prohibited transaction, reg BI, rollovers
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The Department of Labor’s Proposed Prohibited Transaction Exemption and its Impact on Recommendations to Plans, Participants and IRAs (Part 2)

On July 7, 2020, the DOL issued a proposed prohibited transaction exemption (PTE) that would allow conflicted recommendations resulting from nondiscretionary fiduciary investment advice. The proposal is titled “Improving Investment Advice for Workers & Retirees.” And, as my last post, #36 (Part 1), explained, the DOL said that it is re-interpreting part of the definition of fiduciary advice to include many more recommendations, and especially rollover recommendations.

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Best Interest Standard of Care for Advisors #36


best interest, broker-dealers, DOL, fiduciary, investment adviser, IRA, prohibited transaction, reg BI, rollovers

The Department of Labor’s Proposed Prohibited Transaction Exemption and its Impact on Recommendations to Plans, Participants and IRAs (Part 1)

 On July 7, 2020 the DOL issued a proposed prohibited transaction exemption (PTE) that would allow conflicted recommendations resulting from nondiscretionary fiduciary investment advice. The proposal is titled “Improving Investment Advice for Workers & Retirees.” As background, an exemption is an exception to the prohibited transaction rules, but the exception is only available if its conditions are satisfied…and there are conditions.

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Best Interest Standard of Care for Advisors #35


broker-dealers, DOL, registered investment advisers

Comparing the DOL Proposal to the Broker-Dealer and RIA Standards of Conduct

Broker-dealers and investment advisers are now governed by a best interest standard of care. Those standards are based largely on the same fiduciary principles that are incorporated into the ERISA prudent man standard. The DOL recently extended the ERISA standard to an expanded definition of fiduciary status in a new interpretation found in the preamble to its proposed Prohibited Transaction Exemption (PTE) for advice to plans, participants and IRAs. Among the conditions in the PTE is a requirement that advisors adhere to a best interest standard of care which, like its broker-dealer and RIA counterparts, is a combination of a duty of care and a duty of loyalty. This continues the convergence of the fiduciary standards for investment advisers and fiduciary advisors and the fiduciary-like standard for broker-dealers.

My colleagues, Joan Neri and Bruce Ashton, and I have recently written an article describing the similarities (and some differences) among those three pieces of guidance. The article includes a chart, which should make it easier to compare the different relevant provisions from the guidance.

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The DOL’s Fiduciary Rule: Will We Get a New Rule?


DOL, fiduciary, reg BI
by Brad Campbell and Fred Reish

As you may know, the Department of Labor has included the proposal of a new fiduciary rule on its Regulatory Agenda. The Agenda indicated that it would be issued in December of last year. But, of course, it hasn’t.

That raises the question of, if we get a proposed regulation in the near future, will it ever become a final rule?

Of course, if the current Administration wins the Presidential election, the proposed regulation would ultimately be adopted in final form (perhaps with some minor changes). However, if the White House changes parties after this November’s election, there may not be enough time for a regulation to be proposed and finalized. Here’s why.

There are several ways that a new, incoming Administration can stop a regulation from the prior Administration.

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Open Questions on Open MEPs


401(k), DOL

One of the shiny new coins of the 401(k) realm is “Open MEPs.” It’s anticipated that Congress will pass legislation this year that permits Open MEPs. Legislation is needed because of DOL guidance that, in essence, prohibits MEPs that are “open” to all employers. But, what is an Open Multiple Employer Plan? What other kinds of MEPs are there? How do the people that set up MEPs get paid? Here is an article that I, and my partners, Bruce Ashton and Josh Waldbeser, wrote on that subject for ASPPA.
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Best Practices for Plan Sponsors #6


401(k), best practices, DOL, fiduciary, plan sponsors, prudent

Why Wait Until After You are Sued?

This is the sixth of the series about Best Practices for Plan Sponsors.

I am surprised that, after all of the fiduciary litigation against 401(k) plan sponsors, many plan sponsors and their committees have not taken the basic steps to minimize the risk of being sued, or if sued, of being liable. In most of the settled cases, the plaintiffs’ class action attorneys require that certain conditions—or “best practices”—be adopted by the plan fiduciaries. And, in settlement after settlement, those conditions are, by and large, the same. That raises the obvious question, why haven’t plan committees reviewed these cases and instituted the practices required by the settlement agreements?

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Best Interest Standard of Care for Advisors #4


401(k), 403(b), best interest, DOL, prudent, reg BI, registered investment advisers, SEC

What Does “Best Interest” Mean? (Part 1)

I am writing two series of articles that together are called “The Bests.” One is about Best Practices for plan sponsors, while the other is about the Best Interest Standard of Care for advisors. Each series is numbered separately to make it easier to identify the subject that is most relevant to you.

This is the fourth of the series about the Best Interest Standard of Care.

“Best Interest” has become part of the American lexicon . . . as an aspirational goal or a demanding standard—depending on the point of view. But, what does best interest mean? It may mean different things to different people . . . and perhaps even to different regulators. However, I believe that most people would agree on the definition in this article.

As I read the guidance issued by the Department of Labor (DOL), the Securities and Exchange Commission (SEC), and New York State, there are actually two different best interests. The first is a standard of care and the second is a duty of loyalty. Of the two, the duty of loyalty is the easiest to define because, in all of the guidance it boils down to a requirement that an advisor cannot put his interest ahead of the investor’s.

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Best Practices for Plan Sponsors #5


401(k), 403(b), best practices, DOL, fiduciary

Fiduciary Training: The Need for Basics

This is the fifth of the series about Best Practices for Plan Sponsors.

In three earlier posts—Best Practices for Plan Sponsors #2, #3, and #4—about the Sacerdote v. New York University decision, I discussed the good and the bad of the NYU plan committee and made several suggestions about best practices for improving committee performance. This article focuses on one of those suggestions—fiduciary education for committee members.

As a starting point, there is not a legal requirement that committee members receive fiduciary training. Instead, it’s a best practice and good risk management.

But, what should the fiduciary education cover? Based on my analysis of court decisions on fiduciary responsibility, I am worried that fiduciaries may not be adequately educated about their basic responsibilities and particularly their administrative oversight duties. If you look at decisions, such as the NYU case, the issues are basic. For example, one of the defendants did not know if he was still a member of the committee. Another committee member didn’t believe that she was a fiduciary or that she had legal responsibility for the decisions made by the committee. Instead, she thought her role was ministerial, in terms of setting up the meetings and distributing information.

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Best Interest Standard of Care for Advisors #3


401(k), 403(b), best interest, DOL, reg BI, registered investment advisers, SEC

SEC Best Interests . . . When? And What About the DOL

I am writing two series of articles that together are called “The Bests.” One is about Best Practices for plan sponsors, while the other is about the Best Interest Standard of Care for advisors. Each series is numbered separately to make it easier to identify the subject that is most relevant to you.

This is the third of the series about the Best Interest Standard of Care.

The Regulatory Agendas for the SEC and DOL were recently issued. Both have plans for guidance by September of 2019, but the anticipated timing of the guidance has, by and large, been misinterpreted. To understand what I mean, read on.

The SEC’s Agenda said that Final Action on the Regulation Best Interest proposal for broker-dealers and the Interpretation of Standard of Conduct for investment advisers would be “09/00/2019.”

Similarly, the Department of Labor Agenda said that there would be a final rule on the “Fiduciary Rule and Prohibited Transaction Exemptions” with the date of “09/00/2019.”

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