Category Archives: investment adviser

The New Fiduciary Rule (47): Recommendations to Transfer IRAs (SEC)


best interest, broker-dealers, DOL, fiduciary, investment adviser, IRA, reg BI, SEC
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Key Takeaways

  • Two Texas Federal District Courts have “stayed” the effective dates of the DOL’s new fiduciary regulation and related exemptions, meaning that the private sector will not have to comply with those rules until the cases are resolved.
  • As a result, one-time recommendations to plans, participants and IRAs will not be fiduciary advice for purposes of ERISA and the Internal Revenue Code. However, one-time recommendations are regulated by the SEC for broker-dealers and investment advisers and by state insurance departments for insurance producers (primarily under the NAIC Model Regulation #275 which has been adopted by most states).
  • This post discusses SEC and SEC staff guidance on recommendations to transfer IRAs. The next two will cover likely DOL interpretations and NAIC Model Regulation #275’s provisions concerning the transfer or exchange of individual retirement accounts and individual retirement annuities.

The stay of the effective dates of the amended fiduciary regulation and amended exemptions means that the “old” DOL fiduciary regulation (the 5-part test) and the existing exemptions continue in effect indefinitely. As a result, it is unlikely that one-time plan-to-IRA rollover recommendations will be fiduciary recommendations under ERISA or the Internal Revenue Code. However, the standards of conduct for recommendations to transfer IRAs (that is, either individual retirement accounts or individual retirement annuities) are also governed by other regulators (and may still be subject to the DOL’s “old” fiduciary definition). This article and the next two will discuss conduct standards for IRA (including qualified annuities) of  the SEC, NAIC and DOL.

The SEC’s guidance is found in Regulation Best Interest (Reg BI) for broker-dealers and the Commission Interpretation Regarding Standard of Conduct for Investment Advisers (IA Interpretation). While Reg BI imposes a “best interest” standard and the IA Interpretation concerns  a fiduciary standard, the SEC staff, in its SEC Staff Bulletin: Standards of Conduct for Broker-Dealers and Investment Advisers Account Recommendations for Retail Investors explained: Although the specific application of Reg BI and the IA fiduciary standard may differ in some respects and be triggered at different times, in the staff’s view, they generally yield substantially similar results in terms of the ultimate responsibilities owed to retail investors. [The emphasis is mine.]

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The New Fiduciary Rule (44): The Regulation and Exemptions are Stayed (4)—What Remains?


2020-02, best interest, broker-dealers, DOL, fiduciary, investment adviser, IRA, prohibited transaction, rollovers, SEC
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Key Takeaways

  • Shortly after the DOL’s new regulation defining fiduciary advice and amended Prohibited Transaction Exemptions 2020-02 and 84-24 were finalized, two lawsuits were filed in Federal District Courts in Texas.
  • The lawsuits sought to “vacate,” or overturn, the regulation and exemptions as being beyond the authority of the DOL. In addition, the plaintiffs requested that the courts “stay” the effective dates of the regulation and exemptions pending the outcome of the lawsuits.
  • Both courts have “stayed” the effective dates, meaning that the private sector will not have to comply with those rules until the cases are resolved.
  • The next step will be for those courts to determine if the regulation and exemptions are valid or should be vacated.
  • However, there are still compliance issues related to one-time rollover recommendations.

The DOL’s fiduciary regulation was scheduled to become effective this September 23. The exemptions were scheduled to become partially effective this September 23 and fully effective September 23, 2025.

Two Federal district courts—one in the Eastern District of Texas and the other in the Northern District—have stayed the effective dates. That means that the new rules will not be effective until the courts have decided on the validity of the regulation and exemptions and, most likely, until the appeals are exhausted one way or the other.

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The New Fiduciary Rule (43): The Regulation and Exemptions are Stayed (3)—What Remains?


2020-02, broker-dealers, DOL, fiduciary, investment adviser, prohibited transaction, rollovers, SEC
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Key Takeaways

  • Shortly after the DOL’s new regulation defining fiduciary advice and amended Prohibited Transaction Exemptions 2020-02 and 84-24 were finalized, two lawsuits were filed in Federal District Courts in Texas.
  • The lawsuits sought to “vacate,” or overturn, the regulation and exemptions as being beyond the authority of the DOL. In addition, the plaintiffs requested that the courts “stay” the effective dates of the regulation and exemptions pending the outcome of the lawsuits.
  • Both courts have “stayed” the effective dates, meaning that the private sector will not have to comply with those rules until the cases are resolved.
  • The next step will be for those courts to determine if the regulation and exemptions are valid or should be vacated.
  • However, there are still compliance issues related to one-time rollover recommendations.

The DOL’s fiduciary regulation was scheduled to become effective this September 23. The exemptions were scheduled to become partially effective this September 23 and fully effective September 23, 2025.

Two Federal district courts—one in the Eastern District of Texas and the other in the Northern District—have stayed the effective dates. That means that the new rules will not be effective until the courts have decided on the validity of the regulation and exemptions and, most likely, until the appeals are exhausted one way or the other.

As a result, the current fiduciary regulation, with its 5-part test, will continue in effect pending the final resolution of the lawsuits. In the same vein, the current PTEs 84-24 and 2020-02 will continue in effect until a final decision is reached on the validity of the amended PTEs.

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The New Fiduciary Rule (42):The Regulation and Exemptions are Stayed (2)—What Remains?


2020-02, 84-24, broker-dealers, DOL, fiduciary, investment adviser, prohibited transaction, rollovers, SEC
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Key Takeaways

  • Shortly after the DOL’s new regulation defining fiduciary advice and amended Prohibited Transaction Exemptions 2020-02 and 84-24 were finalized, two lawsuits were filed in Federal District Courts in Texas.
  • The lawsuits sought to “vacate”, or overturn, the regulation and exemptions as being beyond the authority of the DOL. In addition, the plaintiffs requested that the courts “stay” the effective dates of the regulation and exemptions pending the outcome of the lawsuits.
  • In the past two weeks, both courts have agreed to stay the effective dates, pending resolution of the cases.
  • The next step will be for those courts to determine if the regulation and exemptions are valid or should be vacated.
  • However, there are still compliance issues.

The DOL’s fiduciary regulation was scheduled to become effective this September 23. The exemptions were scheduled to become partially effective this September 23 and fully effective September 23, 2025.

Two Federal district courts—one in the Eastern District of Texas and the other in the Northern District—have stayed the effective dates. That means that the new rules will not be effective until the courts have decided the validity of the regulation and exemptions and, most likely, until the appeals are exhausted one way or the other.

As a result, the current fiduciary regulation, with its 5-part test, will continue in effect pending the final resolution of the lawsuits. In the same vein, the current PTEs 84-24 and 2020-02 will continue in effect until a final decision is reached on the validity of the amended PTEs.

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The New Fiduciary Rule (41):The Regulation and Exemptions are Stayed


2020-02, 84-24, broker-dealers, DOL, fiduciary, investment adviser, prohibited transaction, rollovers
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Key Takeaways

  • Shortly after the DOL’s new regulation defining fiduciary advice and Amended Prohibited Transaction Exemptions 2020-02 and 84-24 were finalized, two lawsuits were filed in Federal District Courts in Texas.
  • The lawsuits sought to “vacate”, or overturn, the regulation and exemptions as being beyond the authority of the DOL. In addition, the plaintiffs requested that the courts “stay” the effective dates of the regulation and exemptions pending the outcome of the lawsuits.
  • In the past two weeks, both courts have agreed to stay the effective dates, pending resolution of the cases.

The DOL’s fiduciary regulation was scheduled to become effective this September 23. The exemptions were scheduled to become partially effective this September 23 and fully effective September 23, 2025.

The two courts—one in the Eastern District of Texas and the other in the Northern District—have stayed the effective dates. That means that the new rules will not be effective until the courts have decided the validity of the regulation and exemptions and, most likely, until the appeals are exhausted one way or the other.

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The New Fiduciary Rule (34): The “Hire Me” Exception


fiduciary, investment adviser, prohibited transaction
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Key Takeaways

  • The DOL’s final regulation defining non-discretionary fiduciary advice will be effective on September 23 of this year.
  • If a conflicted fiduciary recommendation is made, the requirements (called “conditions”) of PTEs 2020-02 and 84-24 will need to be satisfied in order to retain any compensation resulting from the recommendation.
  • However, absent a fiduciary recommendation, the relief afforded by the exemptions will not be needed.
  • There are three ways to engage with retirement investors without making a recommendation. Those are: “hire me”, education and unsolicited. This article discusses the “hire me” approach.

The Department of Labor’s (DOL) final regulation defining fiduciary status for investment advice to retirement investors is effective on September 23, 2024. The related exemptions—PTE 2020-02 and 84-24—are partially effective on the same date. The exemptions provide relief from prohibited conflicts and compensation resulting from fiduciary recommendations to “retirement investors”–private sector retirement plans, participants in those plans (including rollover recommendations), and IRAs (including transfer and exchange recommendations).

However, the relief provided by the PTEs is not needed unless a conflicted fiduciary recommendation is made. In the preamble to the fiduciary regulation, the DOL described a recommendation as follows:

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ERISA Moments Ep. 25: The Fiduciary Rules and the Impact on Advisors and Insurance Agents


best practices, ERISA, fiduciary, investment adviser

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 Fiduciary Rules and the Impact on Advisors and Insurance Agents, on the Spotlight on Benefits blog.

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The New Fiduciary Rule (32): The DOL’s Final PTE 2020-02


2020-02, DOL, fiduciary, investment adviser
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Key Takeaways

  • The DOL’s fiduciary regulation will be effective on September 23 of this year. As a result, beginning on September 23 one-time recommendations to retirement investors can be fiduciary advice and, where the advice is conflicted, the investment professional and financial institution will need the protection afforded by a PTE.
  • While some of the requirements (called “conditions”) of PTEs 2020-02 and 84-24 also become effective on September 23, others will not be effective until a full year later…September 23, 2025.
  • The PTE that must be used for all investment professionals and financial institutions—other than for independent insurance agents—is PTE 2020-02.
  • As a result, financial institutions need to be working on implementing the first part of the PTE’s requirements…so that compliant practices and disclosures are in place by September 23—just months from now.

On April 25, 2024, the Department of Labor published its final regulation defining fiduciary status for investment advice and the related exemptions—PTE 2020-02 and 84-24. The exemptions provide relief from prohibited conflicts and compensation resulting from fiduciary recommendations to “retirement investors”–private sector retirement plans, participants (including rollovers), and IRAs (including transfers and exchanges). The fiduciary regulation and exemptions will be effective on September 23, 2024, although compliance with some of the conditions in the exemptions will be further delayed.

Let’s look at the final of PTE 2020-02 and its effective dates.

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The New Fiduciary Rule (30): The One-Time Recommendation Definition


broker-dealers, DOL, fiduciary, investment adviser
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Key Takeaways

  • The DOL’s fiduciary regulation and the amended Prohibited Transaction Exemptions (PTEs) 2020-02 and 84-24 will be effective on September 23 of this year.
  • However, some of the requirements (called “conditions”) of PTEs 2020-02 and 84-24 will not be effective until September 23, 2025.
  • As a result, broker-dealers, investment advisers, banks and insurance companies need to begin the work on compliance with the new fiduciary definition and parts of the PTEs…so that compliant practices and disclosures are in place by September 23—just months from now.

On April 25, 2024, the Department of Labor published its final regulation on defining fiduciary status for investment advice, and the related exemptions, in the Federal Register. The exemptions provide relief from prohibited conflicts and compensation resulting from fiduciary recommendations to “retirement investors”–private sector retirement plans, participants (including rollovers), and IRAs (including transfers and exchanges). The fiduciary regulation and exemptions will be effective on September 23, 2024, although compliance with some of the conditions in the exemptions will be further delayed.

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The New Fiduciary Rule (28): Coming Attractions—The Final Fiduciary Rules Are on the Horizon


2020-02, 84-24, DOL, fiduciary, investment adviser
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In November 2023, the U.S. Department of Labor released its package of proposed changes to the regulation defining fiduciary advice and to the exemptions for conflicts and compensation for investment recommendations to retirement plans, participants (including rollovers), and IRAs (including transfers). On March 8, 2024, the DOL sent the final rule to the Office of Management and Budget in the White House. On April 10 the OMB completed its review of the final rules. The next step is for the rules to be published in the Federal Register.

Key Takeaways

  • The final versions of the DOL’s fiduciary regulation and the amended PTEs have been reviewed by the Office of Management and Budget (OMB) in the White House—the final step in the approval process.
  • Now that the OMB has completed its part, the DOL will start the process for publishing the final rules in the Federal Register. The publication will likely be in the next two to three weeks.
  • Sixty days after publication, the final rules will be effective.
  • However, it is not clear if they will be applicable at the same time. There may be a delayed applicability date.

In November of 2023, the DOL proposed amendments to the regulation that defines when a person becomes a fiduciary by virtue of making “investment” recommendations to “retirement investors.”

I put the apostrophes around “investment” because the term, as used in the regulation, includes a range of services and types of properties. And I did the same with “retirement investors” because it is a defined term—private sector retirement plans, participants in those plans, and IRA owners.

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