Tag Archives: corrections

Best Interest Standard of Care for Advisors #93: Correction of Failures to Satisfy PTE 2020-02

Key Takeaways

The DOL’s expanded definition of fiduciary advice is described in the preamble to PTE 2020-02.

When conflicted fiduciary advice is given to retirement investors (that is, retirement plans, participants (including rollovers), and IRA owners), it results in prohibited transactions under the Internal Revenue Code and ERISA. But the PTE then provides relief for conflicted non-discretionary recommendations. However, the relief is only available if all of its conditions are satisfied.

Unfortunately, we are already seeing that some broker-dealers and investment advisers have not fully complied with the exemption’s conditions, at least in connection with some of their recommendations.

That raises the question of “What are the consequences of those failures?” This article discusses the failures, corrections, reporting to the DOL, and inclusion of the failures in the annual retrospective review and report.


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 (including rollover recommendations), and IRA owners (all of whom are referred to as “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 are fiduciaries for their recommendations to retirement investors and, therefore, will need the protection provided by the exemption.

For example, a rollover recommendation will ordinarily be nondiscretionary fiduciary advice and result in a financial conflict of interest that is a prohibited transaction under both ERISA and the Internal Revenue Code. But, since the recommendation is nondiscretionary, PTE 2020-02 provides relief, but only if all of its conditions are met.

Continue reading Best Interest Standard of Care for Advisors #93: Correction of Failures to Satisfy PTE 2020-02