DOL Issues Investment Advice Fiduciary Class Exemption

The Department of Labor’s (DOL’s) Employee Benefits Security Administration (EBSA) has issued a long-awaited class exemption, Prohibited Transaction Exemption (PTE) 2020-02, providing guidance to investment advisors who counsel retirement and other investors. The guidance completes a process that began with 2016 regulations and exemptions issued under the Obama administration, which were vacated in 2018 by a federal appeals court, and a promise by new DOL leadership under President Trump to issue new guidance in its stead. Yesterday’s issuance of a news release, fact sheet, and PTE 2020-02 completes that process.

PTE 2020-02 essentially maintains the EBSA impartial conduct standard that has been in effect since 2018, under which those who advise retirement and retail investors are to adhere to several principles:

receive only reasonable compensation;
make no misleading statements in the course of their advising; and
act in the client’s best interest.

Of particular significance is EBSA’s assertion in its news release that this guidance “expresses the department’s views on when rollover advice could be considered fiduciary advice under the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code.”

PTE 2020-02 will take effect 60 days after publication in the Federal Register.