Tag Archives: Prudent

The New Fiduciary Rule (12): Advisors and Agents with Restricted Investment Menus (Part 1)

The U.S. Department of Labor has released its package of proposed changes to the regulation defining fiduciary advice and to the exemptions for conflicts and compensation for investment recommendations to retirement plans, participants (including rollovers), and IRAs.

Key Takeaways

  • The Department of Labor’s proposed fiduciary “package” expands the scope of fiduciary status (to include, e.g., one-time recommendations) and the types of transactions that are covered by fiduciary advice.
  • That is particularly important since, where the fiduciary recommendation involves a conflict of interest (e.g., a new fee or a commission), the firms and their representatives and agents will need to satisfy the conditions of either PTE 84-24 or PTE 2020-02.
  • One question that arises under the best interest standard in the PTEs is whether an adviser or agent can make recommendations from limited, or restricted, menus of available products.

This article focuses on PTE 2020-02 and the relief it provides to broker-dealers, investment advisers, banks and trust companies, and insurance companies that sell through employees and statutory employees.

Continue reading The New Fiduciary Rule (12): Advisors and Agents with Restricted Investment Menus (Part 1)


Best Interest Standard of Care for Advisors #44

The Department of Labor’s Prohibited Transaction Exemption and Its Impact on Recommendations to Plans, Participants and IRAs (Part 9)

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.

Continue reading Best Interest Standard of Care for Advisors #44