Proposed Rule: A rule proposed by the US Department of Labor would eliminate a pair of ERISA exemptions that have allowed financial advisers and brokers to steer clients into investment vehicles that have a significant upside for the adviser but may not have been the best option for the client. The first proposed change would cause broker-dealers who provide one-time advice (rather than ongoing management of funds or other services) to be deemed investment advisers under ERISA. The second proposed change would eliminate a requirement that, in order for a broker to be considered a fiduciary, the financial adviser and the client agree that information provided by the broker was the primary basis for an investment decision. The proposal also creates a "best interest contract exemption" to allow firms to continue to set their own compensation practices so long as they meet certain requirements. There is a 75-day comment period on the proposed rule, plus a public hearing after the comment period closes.
Impact: The proposed rule has been criticized by the financial services industry as creating impediments to access to investment advice and choice. The proposal also has encountered bi-partisan criticism in Congress, and legislation currently pending in the House of Representatives would essentially nullify the proposed rule.