The US Department of Labor's Employee Benefits Security Administration has announced a proposed rule to update the definition of "fiduciary." The proposed rule will further clarify the regulations to more broadly define the term as a person who provides investment advice to plans for a fee or other compensation.

The DOL's website provides the following:

"The proposed rule would amend a 1975 regulation that defines when a person providing investment advice becomes a fiduciary under the Employee Retirement Income Security Act. The proposed amendment would update that definition to take into account changes in the expectations of plan officials and participants who receive advice, as well as the practices of investment advice providers.

According to the proposal, the 1975 rule's approach to fiduciary status may inappropriately limit the department's ability to protect plans, participants and beneficiaries from conflicts of interest that may arise from today's diverse and complex fee practices in the retirement plan services market. The proposed rule is designed to remedy this limitation, and protect plan officials and participants who expect unbiased advice, by giving a broader and clearer understanding of when individuals providing such advice are subject to ERISA's fiduciary standards."

The proposed rule itself is available here.

The introduction to the rule provides that "the proposed rule takes account of significant changes in both the financial industry and the expectations of plan officials and participants who receive investment advice; it is designed to protect participants from conflicts of interest and self-dealing by giving a broader and clearer understanding of when persons providing such advice are subject to ERISA's fiduciary standards. For example, the proposed rule would define certain advisers as fiduciaries even if they do not provide advice on a ``regular basis.'' Upon adoption, the proposed rule would affect sponsors, fiduciaries, participants, and beneficiaries of pension plans and individual retirement accounts, as well as providers of investment and investment advice related services to such plans and accounts."

Written comments on the Proposed Rule may be submitted through January 20, 2011.