On April 6, 2016, the U.S. Department of Labor (DOL) issued its final rule expanding the “investment advice fiduciary” definition under the Employee Retirement Income Security Act of 1974 (ERISA) and modifying the complex of prohibited transaction exemptions for investment activities in light of that expanded definition.
The final rule retains critical elements of the April 14, 2015, proposed rulemaking, including:
- Significantly expanding the circumstances in which broker-dealers, investment advisers, insurance agents, plan consultants and other intermediaries are treated as fiduciaries to ERISA plans and individual retirement accounts (IRAs), and are therefore precluded from receiving compensation that varies with the investment choices made or from recommending proprietary investment products absent an exemption;
- Providing new exemptions, and modifying or revoking a number of existing exemptions, addressing those activities; and
- Retaining the ERISA distinction between non-fiduciary “investment education” and fiduciary “investment advice.”
The final rule also contains significant changes that reflect the extensive public comments on the proposed rule received by the DOL.
Read our in-depth analysis about the final rule.
- Effective Date: June 7, 2016 (60 days after the scheduled Federal Register publication date of April 8)
- Applicability Date: Generally, April 10, 2017, with a further transition period for many requirements of the BIC exemption to January 1, 2018, and a conditional grandfather rule for certain arrangements existing before April 10, 2017.
Sutherland has been actively involved in the expanded DOL fiduciary rulemaking process since before the original proposal was released in October 2010. In anticipation of the final rule, we have brought together a team of advisers to the retirement plan, banking, insurance, mutual fund, broker-dealer and investment adviser sectors to provide our clients with comprehensive compliance advice. We provide practical advice on the impact of the final rule on every aspect of our clients' business, from retirement product and service development to distribution and platform management, as well as the regulatory compliance, investigations, and litigation challenges that will inevitably arise from the new rule.
Questions regarding the expanded DOL Fiduciary Rule? Please contact us.