Key Takeaways
The DOL has issued FAQs that generally explain PTE 2020-02 and the expanded definition of fiduciary advice.
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- The DOL’s expanded definition of fiduciary advice was described in the preamble to PTE 2020-02.
- The PTE then provides conditional relief for conflicted non-discretionary recommendations, if its conditions are satisfied.
- This article discusses whether the DOL’s position is that the fiduciary definition and the best interest standard in the PTE require “monitoring” of recommended investments. The answer is, possibly, in some cases.
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.