The Department of Labor (DOL) confirmed on February 12 that the Trump-era Prohibited Transaction Exemption 2020-02 (PTE) would go into effect as scheduled on February 16, 2021. The PTE will likely affect the business of broker-dealers that regularly make investment recommendations to IRA owners, as well as retirement plans and their participants (including rollover recommendations). This is due in part to the requirements of the PTE itself, but also because the rulemaking includes new interpretations that will expand the circumstances under which broker-dealers and their associated persons will be deemed to be advice fiduciaries. (The exemption refers to broker-dealers as “financial institutions” and their associated persons as “investment professionals” and this article uses those terms.)
As a result of these changes, broker-dealers need to re-evaluate whether and when they (and their investment professionals) may be fiduciaries, and where they are fiduciaries, they need to develop compliant practices, policies and procedures.
Continue reading “Broker-Dealer Services to Plans and IRAs: Impact of the DOL Fiduciary Advice Exemption”
The overturning of the DOL’s Fiduciary Rule by the Fifth Circuit last year had two impacts: first, the definition of “fiduciary” for investment advice to plans and IRAs reverted back to the narrower Five-Part Test issued in 1975; second, the Best Interest Contract Exemption (or “BIC Exemption”) and amendments to other exemptions also ceased to exist.
Continue reading “The DOL’s Temporary Enforcement Policy: Potential Traps for the Unwary”
The Department of Labor (DOL) has extended the current transition period for the DOL Fiduciary Rule exemptions in order to reexamine the rule and its exemptions to see if changes are warranted and to coordinate with other regulatory agencies. This pushes the end date from January 1, 2018 to July 1, 2019.
The extension does not change the requirements of the Fiduciary Rule or the transition period exemptions currently in effect. However, there are certain provisions of the Best Interest Contract Exemption, the Principal Transaction Exemption, and amendments to Prohibited Transaction Exemption 84-24 that are deferred.
So, does the extension mean you can relax? The simple answer is no.
We published a client alert that details what the extension means for plan service providers, and some essential steps they should take in the year ahead. Click here to read the alert.