DOL Issues FAQs and Additional Guidance on Fiduciary Investment Advice
On April 13, 2021, the DOL issued guidance on fiduciary investment advice for retirement investors, employee benefit plans and investment advice providers. As a reminder, the DOL adopted prohibited transaction exemption (PTE) 2020-02, Improving Investment Advice for Workers & Retirees, in December of 2020. The DOL announced on February 12, 2021, that the prohibited transaction exemption for investment advice fiduciaries would go into effect as scheduled on February 16, 2021. (See our article in the February 17, 2021, edition of Compliance Corner for more information.)
The issued FAQs address PTE 2020-02 and provide information about the DOL’s next steps in its regulation of investment advice. The major sections of the FAQs address the PTE’s background, compliance dates, definition of fiduciary investment advice and compliance with the PTE generally. Importantly, Question #3 indicates that Field Assistance Bulletin 2018 (which outlined the DOL’s temporary enforcement policy) will remain in place until December 20, 2021. Question #5 also mentions that the DOL is reviewing issues of fact, law, and policy related to the PTE, and anticipates taking further regulatory action as appropriate. Questions 10 – 20 outline what investment advisors must do to comply with the PTE, specifically verifying the impartial conduct standards that must be met. Question #21 describes how the DOL will enforce compliance with the PTE.
The DOL also provided a set of FAQs that explains how individuals should go about selecting an investment adviser. The FAQs recommend that individuals ask if their financial advisers are fiduciaries and whether they are in compliance with PTE 2020-02. It also suggests questions concerning fees that will be charged and potential conflicts of interest.
Ultimately, employers should work with their service providers to ensure compliance with PTE 2020-02. They can also point participants to the FAQs concerning choosing an investment adviser.
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PTE 2020-02 FAQS »
Choosing the Right Person to Give You Investment Advice »