DOL “Investment Advice” FAQs: Considerations for Investment Advisers, Broker-Dealers and Insurance Companies

November 17, 2016

The U.S. Department of Labor (DOL) issued in April 2016 the final version of its controversial “investment advice” regulation and various related exemptions (collectively, Final Rules), which are widely expected to have a significant impact on the financial services industry. Recently, the DOL issued a first set of FAQs regarding the Final Rules.

As discussed in previous Dechert OnPoints, the Final Rules expand the universe of those considered to be “fiduciaries” under the Employee Retirement Income Security Act of 1974 (ERISA), and section 4975(e)(3)(B) of the Internal Revenue Code (Code), through the provision of investment advice to retirement investors (including retirement plans and individual retirement accounts (IRAs)). As a result, a financial institution or adviser dealing with a retirement investor must either: (i) avoid giving advice that results in fiduciary status under the Final Rules; or (ii) operate in compliance with the Final Rules (including the requirements of any exemption necessary to receive compensation or engage in a transaction that would otherwise be prohibited for an ERISA fiduciary).

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