Regulatory Alert | April 2016

Regulatory Alert | April 2016

U.S. Department of Labor finalizes rules redefining a fiduciary for purposes of retirement investment advice

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The U.S. Department of Labor (DOL) released publicly Final Rules redefining who is considered a “fiduciary” for purposes of retirement investment advice (Final Rules or Rules) and expanding substantially the universe of fiduciaries and the standard of care applicable to them. Specifically, fiduciaries must guard the “best interest” of the customer, not merely assess the suitability of investment options. This will have a profound impact on how retirement investment advice is delivered in the United States.

All entities that provide investment advice to an ERISA-based plan, plan sponsor, plan fiduciary, plan participant or beneficiary, or to an IRA or IRA owner, will be affected. These advisers must either avoid receiving payments that create conflicts of interest or comply with the exemptions contained in the Final Rules, including:

  • Acknowledge the fiduciary status of the firm and its individual advisers;
  • Adhere to the basic standards of impartial conduct, including giving prudent advice that is in the best interest of the customer, avoiding misleading statements, and receiving no more than reasonable compensation;
  • Adopt policies and procedures designed to mitigate conflicts of interest; and
  • Disclose conflicts of interest and the cost of advice.

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