DOL Issues Guidance on Class Exemption for Investment Advice Fiduciaries

The DOL issued guidance on a February 2021 exemption (Prohibited Transaction Exemption ("PTE") 2020-02, "Improving Investment Advice for Workers & Retirees") that allows investment advice fiduciaries to receive compensation and engage in certain transactions otherwise prohibited under ERISA and the Internal Revenue Code Section. The DOL provided this guidance in two documents.

In the first document, which is entitled: "Choosing the Right Person to Give You Investment Advice: Information for Investors in Retirement Plans and Individual Retirement Accounts," the DOL addressed questions that a retirement investor should consider before relying on investment advice from an investment advice provider. (The DOL offered additional background for retirement investors to understand the purpose of the questions.) The DOL covered:

  • whether the investment advice provider is a fiduciary under ERISA when providing advice;

  • whether the investment advice provider will provide a written statement that it is a fiduciary when making investment recommendations;

  • what fees and expenses will be charged and what the fees and expenses cover; and

  • what conflicts of interest does the advice provider have when making a recommendation to the retirement investor?

In the second document, the DOL provided an FAQ on the new fiduciary advice exemption. The FAQ addresses compliance with PTE 2020-02, including as to the Impartial Conduct Standards. In addition, the FAQ provides information on the DOL's next steps regarding the regulation of investment advice, noting that the DOL "anticipates taking further regulatory and sub-regulatory actions, as appropriate, including amending the investment advice fiduciary regulation, amending PTE 2020-02, and amending or revoking some of the other existing class exemptions available to investment advice fiduciaries."

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