The U.S. Labor Department (DOL) issued guidance Tuesday on its fiduciary investment advice for employee benefit plans, retirement investors, and investment advice providers.
The guidance from the DOL's Employee Benefits Security Administration (EBSA) relates to the department's "Improving Investment Advice for Workers & Retirees" exemption and follows a February 12 announcement that the Trump-era exemption would go into effect as scheduled on February 16.
Ali Khawar, acting assistant secretary of Labor for EBSA, said Tuesday in a statement that the two-pronged guidance "provides helpful information regarding the importance of selecting an investment advice provider who is a fiduciary and the protections that are provided to retirement investors under the 'Improving Investment Advice for Workers & Retirees' exemption."
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The compliance-focused FAQ "provides assistance to financial institutions and investment professionals as they ramp up compliance with the exemption," Khawar said.
The Labor Department "made clear, when it allowed the exemption to take effect as scheduled, that additional guidance was on the way, so we were expecting this," Barbara Roper, director of investor protection for the Consumer Federation of America, told Treasury & Risk sister publication ThinkAdvisor Tuesday in an email.
"Operating within the limitations of the exemption, the DOL has done an excellent job of giving real substance to requirements to act in the customer's best interest and ensure that conflicts of interest are not allowed to inappropriately influence recommendations," Roper said.
Assuming Gary Gensler "is confirmed this week, as expected," to be chairman of the Securities and Exchange Commission (SEC), "we hope for similar guidance from the SEC," Roper added. "The rubber really meets the road in the answer to question 16 on mitigation of conflicts. It is really strong and provides a model we hope the SEC will follow. If they do, investors may actually start receiving the best-interest advice they've long been promised."
She noted that, "while there are still areas where the rules themselves will need to be shored up, at both DOL and SEC, this is an important step in the right direction."
Employee Retirement Income Security Act (ERISA) attorney Fred Reish of Faegre Drinker told ThinkAdvisor Tuesday, in another email, that the DOL's FAQ "is a conversational, easy-to-read explanation of what 2020–02 [the fiduciary PTE] requires and why the DOL made some of its decisions on fiduciary status and about the conditions to be satisfied in order to obtain the benefits of the exemption. But there was nothing new. Almost all of the information in the FAQ is found somewhere in the lengthy preamble to 2020–02. The FAQ will be helpful, though, to help people understand the rule and its requirements. It's a starting point for compliance."
The Labor Department said its guidance is limited to the application of federal retirement laws to advice concerning investments in plans covered by ERISA, such as 401(k) plans, and the Internal Revenue Code, such as IRAs. The department also said that it is continuing to review "issues of fact, law, and policy related to the exemption and, more generally, its regulation of fiduciary investment advice."
From: ThinkAdvisor
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Melanie Waddell
Melanie is senior editor and Washington bureau chief of ThinkAdvisor. Her ThinkAdvisor coverage zeros in on how politics, policy, legislation and regulations affect the investment advisory space. Melanie’s coverage has been cited in various lawmakers’ reports, letters and bills, and in the Labor Department’s fiduciary rule in 2024. In 2019, Melanie received an Honorable Mention, Range of Work by a Single Author award from @Folio. Melanie joined Investment Advisor magazine as New York bureau chief in 2000. She has been a columnist since 2002. She started her career in Washington in 1994, covering financial issues at American Banker. Since 1997, Melanie has been covering investment-related issues, holding senior editorial positions at American Banker publications in both Washington and New York. Briefly, she was content chief for Internet Capital Group’s EFinancialWorld in New York and wrote freelance articles for Institutional Investor. Melanie holds a bachelor’s degree in English from Towson University. She interned at The Baltimore Sun and its suburban edition.
