Category Archives: Reg BI

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.

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Best Interest Standard of Care for Advisors #50

The Department of Labor’s “Fiduciary Rule,” PTE 2020-02 (Part 15): Mitigation Strategies


This series focuses on the DOL’s new fiduciary “rule”. This post is the 15th in a subseries discussing special or unique 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”).

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Best Interest Standard of Care for Advisors #49

The Department of Labor’s “Fiduciary Rule,” PTE 2020-02 (Part 14): The Two Compensation Requirements: Reasonable Compensation and Mitigation


This series focused on the DOL’s new fiduciary “rule”. This post is the 14th in a subseries discussing special or unique compliance issues related to the rule. This article looks at the issues related to complying with the rule’s reasonable compensation and 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.

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Best Interest Standard of Care for Advisors #39

Investment Adviser Considerations: The Department of Labor’s Prohibited Transaction Exemption and Its Impact on Recommendations to Plans, Participants and IRAs (Part 4)


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. (https://www.govinfo.gov/content/pkg/FR-2019-07-12/pdf/2019-12208.pdf) The exemption became effective on 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 to take rollovers to IRAs with the advisors, and (2) to IRA owners about how to invest in their IRAs. My last article, Best Interest #38, discussed the impact on investment advisers who recommend rollovers. This article covers the impact on investment advisers for their services to IRAs and related conflicts of interest.

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Best Interest Standard of Care for Advisors #38

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

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

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 #34

Regulation Best Interest: Best Interest and Suitability—How They Differ (Part 5)

Regulation Best Interest (Reg BI) imposes a “best interest” standard of care on broker-dealers for their recommendations of securities and investment strategies to retail customers. That raises the question, what does best interest mean and how does it differ from suitability?

Parts 1, 2 and 3 of this series (Best Interest Standard of Care for Advisors #30, #31 and #32) explain that the difference between best interest and suitability is not easily defined. However, based on the SEC’s discussion in the Adopting Release for Reg BI, I provided five examples of where best interest appears to impose a more demanding standard than suitability. These examples focus on the Reg BI requirement that broker-dealers (and their registered representatives) consider costs in the development of recommendations. While costs are not the only factor to be considered, the SEC says that “best interest” makes cost a more important factor than it was under the suitability standard.

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Best Interest Standard of Care for Advisors #32

Regulation Best Interest: Best Interest and Suitability—How They Differ (Part 3)

Regulation Best Interest (Reg BI) imposes a “best interest” standard of care on broker-dealers for their recommendations of securities and investment strategies to retail customers. That raises the question, what does best interest mean and how does it differ from suitability?

(Note:  While the discussion in this article is based on Reg BI’s best interest requirements for broker-dealers, the SEC has also imposed a best interest standard on investment advisers. As a result, investment advisers should also be attentive to these issues.)

As I explained in Parts 1 and 2 of this article (Best Interest Standard of Care for Advisors #30 and #31), the difference between best interest and suitability is a hard question without an easy answer. However, based on the SEC’s discussion in the Adopting Release, I have developed examples of where best interest appears to impose a more demanding standard than suitability. These examples focus on the Reg BI requirement that broker-dealers (and their registered representatives) consider costs in the development of recommendations. While costs are not the only factor to be considered, the SEC says that the best interest rule makes cost a more important factor than it was under the suitability standard.

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Best Interest Standard of Care for Advisors #31

Regulation Best Interest: Best Interest and Suitability—How They Differ (Part 2)

Regulation Best Interest (Reg BI) imposes a “best interest” standard of care on broker-dealers for their recommendations of securities and investment strategies to retail customers. That raises the question, what does best interest mean and how does it differ from suitability?

While the discussion in this article is based on the Reg BI best interest requirements for broker-dealers, the SEC has also imposed a best interest standard on investment advisers.  As a result, investment advisers should also be attentive to these issues.

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