Tag Archives: enforcement

Best Interest Standard of Care for Advisors #95: The Four Effective Dates for PTE 2020-02


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

The DOL’s expanded interpretation of fiduciary advice is described in the preamble to Prohibited Transaction Exemption (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 the PTE’s conditions are satisfied.

The DOL’s fiduciary interpretation and the PTE and its requirements were not all effective at the same time, causing some confusion. This article discusses the four effective dates or, more appropriately, enforcement dates.

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 (including rollover recommendations), and IRA owners (including transfer recommendations)– all of whom are referred to as “retirement investors”. In addition, in the preamble to the PTE the DOL announced an expanded interpretation 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.

Continue reading Best Interest Standard of Care for Advisors #95: The Four Effective Dates for PTE 2020-02 →

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Best Interest Standard of Care for Advisors #83: Compliance with PTE 2020-02: Enforcement of the Exemption


2020-02, best interest, DOL, fiduciary
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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 has issued FAQs that generally explain PTE 2020-02 and the expanded definition of fiduciary advice.

  • In FAQ 21, the DOL discussed how it would enforce compliance with the exemption.
  • As a starting point, the DOL has the authority to interpret and enforce the requirements of the PTE as they apply to retirement plans, including recommendations to participants to take their benefits out of a retirement plan and roll to an IRA.
  • In addition, under ERISA there are private rights of actions for breaches of fiduciary duties to plans and participants, including recommendations to rollover.
  • In addition, while the DOL does not have investigative or enforcement authority for violations of the conditions of the exemption for non-ERISA vehicles, such as IRAs, if it finds those violations it will refer them to the IRS.

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 (including rollover recommendations), 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 are 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 #83: Compliance with PTE 2020-02: Enforcement of the Exemption →

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