Tag Archives: investment professionals

Best Interest Standard of Care for Advisors #62: Compliance with PTE 2020-02: Conflicted Compensation


2020-02, best interest, broker-dealers, DOL, fiduciary, investment adviser, IRA, prohibited transaction, rollovers
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The DOL “Fiduciary Rule,” FAQ 12: PTE 2020-02 and Conflicted Compensation

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 FAQs generally explain PTE 2020-02 and the expanded definition of fiduciary advice.
  • FAQ 12 explains that, if the conditions of the exemption are satisfied, financial institutions and investment professionals can receive conflicted compensation resulting from fiduciary recommendations to “retirement investors”, including IRA owners.
  • The Impartial Conduct Standards, must be satisfied from February 16, 2021 until December 20, 2021 under the DOL non-enforcement policy (with concurrence by the IRS), and then on December 21, all of the conditions of PTE 2020-02 must be satisfied.

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 retirement plans, participants 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 will be fiduciaries for their recommendations to retirement investors and, therefore, will need the protection provided by the exemption.

In April, the DOL issued FAQs that explain the fiduciary interpretation and the conditions of the exemption.

This article discusses FAQ 12—a DOL question and answer about the receipt of compensation resulting from recommendations to retirement investors.

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Best Interest Standard of Care for Advisors #61: Interim Compliance with PTE 2020-02: The Impartial Conduct Standards


2020-02, best interest, broker-dealers, DOL, fiduciary, investment adviser, IRA, prohibited transaction, rollovers
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The DOL “Fiduciary Rule,” FAQ 11: The Impartial Conduct Standards

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 FAQs generally explain PTE 2020-02 and the expanded definition of fiduciary advice.
  • FAQ 11 discusses the Impartial Conduct Standards, which must be satisfied from February 16, 2021 until December 20, 2021 under the DOL non-enforcement policy (with concurrence by the IRS), and then on December 21, the Impartial Conduct Standards become one of the conditions of full compliance with PTE 2020-02.

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 retirement plans, participants 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 will be fiduciaries for their recommendations to retirement investors and, therefore, will need the protection provided by the exemption.

In April, the DOL issued FAQs that explain the fiduciary interpretation and the conditions of the exemption.

This article discusses FAQ 11—a DOL question and answer about the Impartial Conduct Standards. The Impartial Conduct Standards must be satisfied between February 16 and December 20 to obtain the relief afforded by the DOL’s non-enforcement policy. After December 20, the Impartial Conduct Standards must still be satisfied…as one of the conditions in PTE 2020-02.

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Best Interest Standard #60: Compliance with PTE 2020-02


2020-02, best interest, DOL, fiduciary, investment adviser, IRA, prohibited transaction, rollovers
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The DOL “Fiduciary Rule,” FAQ 10: The PTE Conditions

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 FAQs generally explain PTE 2020-02 and the expanded definition of fiduciary advice. FAQ 10 discusses the requirements imposed by the PTE.
  • Prohibited Transaction Exemption 2020-02–has two parts. One part is the expanded interpretation of the definition of fiduciary advice (in the preamble to the PTE) which will cause many more rollover recommendations to be considered fiduciary advice. This article looks at DOL FAQ #9 that explains that Prohibited Transaction Exemption (PTE) 2020-02 provides relief from the prohibition on compensation from a rollover IRA due to a fiduciary recommendation to roll over.
  • The second part is an exemption that creates an exception to the prohibited transaction rules for fiduciary advice that results in compensation for a financial institution (e.g., broker-dealer or investment adviser) and its investment professionals. The exemption includes relief for compensation earned from a rollover IRA and its investments (including annuities). FAQ 10 covers the requirements of the exemption.

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 retirement plans, participants 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 will be fiduciaries for their recommendations to retirement investors and, therefore, will need the protection provided by the exemption.

In April, the DOL issued FAQs that explain the fiduciary interpretation and the conditions of the exemption.

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Best Interest Standard of Care for Advisors #52


2020-02, best interest, DOL, fiduciary, IRA, prohibited transaction, rollovers
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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.

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 retirement plans, participants and IRA owners (“retirement investors”).

In addition, , the DOL announced,  in the preamble to the PTE, 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. The relief provided by the exemption is conditional, that is, the “conditions” in the exemption must be satisfied in order 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 #47


best interest, broker-dealers, DOL, fiduciary, investment adviser, IRA, prohibited transaction
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The Department of Labor’s “Fiduciary Rule,” PTE 2020-02 (Part 12): The Requirement that Investment Advisers and Broker-Dealers to Receive No More Than Reasonable Compensation

On February 16, 2021, the DOL’s prohibited transaction exemption (PTE) 2020-02 became effective. The PTE is titled “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. In addition, they will need prudent, or best practice, processes to satisfy the fiduciary and best interest standards of care.

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