On January 13, the Department of Labor (DOL) released a second set of frequently asked questions (FAQs) in response to comments from financial services firms and other stakeholders on its recently-released Fiduciary Rule, which redefines a fiduciary investment advisor under the Employee Retirement Income Security Act of 1974. The DOL issued an initial set of 34 answers to FAQs about the Fiduciary Rule back in October, focusing on the rule’s exemptions, such as the “best-interest contract” exemption and the “prohibited-transaction” exemption. The second set of FAQs provides further clarification on the scope of various exemptions regarding investment recommendations, but also includes guidance on topics such as: (i) investment education; (ii) general communications versus fiduciary investment advice; (iii) fees and other compensation; and (iv) platform providers.
The FAQs further reflect, among other things, that an adviser charging clients a level asset-based fee for providing advice on 401(k) fund offerings may use revenue-sharing payments to offset part or all of that level fee, without running afoul of the fiduciary regulation. The guidance also clarifies that providing educational information to IRA and retirement customers about investment alternatives—such as product features, returns and fees—will not be considered “investment advice” so long as a bank does not make any specific investment recommendations. And, in question 34, the DOL explains that fiduciary status is not triggered by offering to customers an automatic sweep of any uninvested cash from the customer’s account into a short-term investment vehicle on a daily basis.