On April 14, 2015, the Department of Labor issued its much anticipated re-proposal of regulations defining and expanding the persons who are treated as ERISA fiduciaries. Under the proposal, subject to certain exceptions, all persons who provide investment advice or recommendations for a fee to an employer-sponsored retirement plan, plan fiduciary, plan participant, IRA or IRA owner would be deemed “fiduciaries”. Other than investment education and “order taking”, most other investment sales related activities will result in fiduciary status. Some of these advisors are subject to federal securities laws, others are not.
Being a fiduciary means that the advisor must provide impartial advice and put the client’s best interest first and must not accept any compensation payments creating conflicts of interest unless the payments qualify for an exemption (newly proposed) intended to ensure that the customer is adequately protected. If the regulations are finalized, compliance with the terms of the new exemption will be a necessary condition for continuing many of the compensation practices currently in use by the investment industry.