I. Introduction
On April 6, 2016, the Department of Labor (referred to herein as "DOL" or the "Department") issued its long-awaited changes to the definition of an "investment advice" fiduciary and accompanying exemptions (collectively, the "Rule"). The definition of investment advice fiduciary is a fundamental legal pillar for those many providers of services to employee benefit plans ("ERISA Plans") subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and individual retirement accounts ("IRAs") subject to the Internal Revenue Code of 1986, as amended (the "Code") (ERISA Plans and IRAs, together referred to herein as "Plans"). The 4,000 plus written comments and four days of hearings speak quite clearly to one regulator's characterization that "obviously, any regulatory project that aims at the fiduciary definition is going ... right to the core [of ERISA]"1
Part II of this Stroock Special Bulletin assesses some of the potential impacts of the Rule for financial market institutions such as investment banks, investment managers, alternative funds and products, insurance companies, platform providers, and broker-dealers and other providers dealing with Plans outside of the institutional markets. Part III provides a description of the new definition of investment advice fiduciary, with Part IV providing descriptions and observations of the exceptions to investment advice fiduciary status. Parts V through VII introduce and highlight features of the new exemptions that most market participants dealing with Plans outside of the institutional markets will need to explore. Part VIII discusses changes to existing prohibited transaction exemptions, and Parts IX and X provide additional information, including transition guidance.
Attached to this Stroock Special Bulletin are several charts intended to provide insights to aspects of the changes in a digestible format. Chart I compares the existing rule's definition of investment advice fiduciary with that of the new Rule. Chart II compares existing guidance on "investment education" with its treatment under the Rule. Other charts contain information on other key aspects of the Rule and its impacts, including on the implementation and transition timeline.
Download the full article (incl. footnotes) here
1 1 BNA, Inc. Pensions & Benefits Daily, "DOL's Advice to the Advisers and Brokers: See Fiduciary Proposed Rule, Then Comment." Posted February 26, 2015.
Originally published April 2016
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
