NASAA Opposes DOL-Proposed Exemption for Investment Advice Fiduciaries
The North American Securities Administrators Association ("NASAA") urged the DOL not to adopt a proposed class exemption under ERISA, arguing that it would "jeopardize" the security of retirement investors.
As previously covered, the proposed class exemption would allow fiduciaries to receive compensation when providing investment advice (including in connection with rollovers to IRAs), and to engage in principal transactions (including riskless-principal transactions) that would otherwise be prohibited under ERISA and the Internal Revenue Code. In addition, the DOL submitted a technical amendment implementing the Fifth Circuit's decision to vacate the DOL's 2016 Fiduciary Rule (the "2016 Fiduciary Rule"), which reinstated the five-part test for determining when a person is a fiduciary in connection with the provision of investment advice from the DOL's 1975 regulation.
In a comment letter regarding the DOL's Notice of Proposed Class Exemption, NASAA stated that "taken together, the various aspects of the Proposal will create outcomes that are the opposite of the fiduciary protections that retirement investors deserve, and that Congress intended under ERISA." In lieu of a return to the 1975 test, NASAA urged the adoption of aspects of the 2016 Fiduciary Rule (see previous coverage), including defining a person as an investment advice fiduciary under ERISA Section 3(21)(A)(ii) whenever that person makes a recommendation regarding a retirement plan or account.
NASAA recommended the addition of several related-investor protections should the DOL choose to re-implement the 1975 test, such as:
- specifying that a person always acts as an investment advice fiduciary when they provide advice in connection with a rollover of a retirement account;
- expressly prohibiting certain questionable practices such as sales contests; and
- "establishing clear ERISA-focused disclosure obligations" for investment advice fiduciaries, rather than allowing fiduciaries to rely on disclosures mandated by other regulators (such as Form CRS).
Related Articles
-
The DOL proposed a new class exemption for investment advice fiduciaries from certain prohibited transaction rules under ERISA and the Internal Revenue Code.
-
A three-judge panel of the Fifth Circuit Court of Appeals vacated the DOL fiduciary rule, confirming a March 2018 ruling.
-
The DOL issued a temporary enforcement policy applicable to investment advice fiduciaries in light of a Fifth Circuit decision to vacate the fiduciary rule.
-
The Department of Labor provided guidance on responsibilities for plan fiduciaries and other stakeholders regarding shareholder rights, written statements of investment policy, and economically targeted investments.
-
The U.S. Department of Labor submitted a proposal to the Office of Management and Budget to delay the applicability of several important provisions of the Fiduciary Rule.
-
In a Wall Street Journal opinion piece, United States Secretary of Labor Alexander Acosta explained his decision not to impose additional delays to the implementation date of the Fiduciary Rule.
-
The Department of Labor issued a final rule delaying the applicability date of the DOL’s rule defining who is a fiduciary under ERISA and Section 4975 of the Internal Revenue Code in connection with the provision of investment advice and certain related prohibited transaction exemptions (including the Best Interest Contract Exemption and the Principal Transaction Exemption) by 60 days.
-
The DOL issued a "temporary enforcement policy" related to a recently proposed 60-day extension of the fiduciary rule applicability date.
-
The Department of Labor proposed a 60-day delay of the applicability date of the Fiduciary Duty Rule.
-
U.S. District Court for the Northern District of Texas Dallas Division Chief Judge Barbara M.G. Lynn denied a motion for summary judgment by the Chamber of Commerce, et. al. to challenge and vacate the heightened fiduciary standards mandated by the DOL fiduciary rule.
-
The Department of Labor adopted its final regulation addressing the definition of who is a fiduciary of an employee benefit plan under ERISA, by virtue of giving investment advice to a plan, its participants or its beneficiaries.