Labor Department Finalizes Fiduciary Investment Advice Exemption

The Department of Labor today finalized its proposed class exemption on fiduciary investment advice. Available to banks and other investment advice fiduciaries, the exemption would permit receiving compensation as a result of providing fiduciary investment advice, including advice to roll over a participant’s account in an employee benefit plan to an individual retirement account and other similar types of rollover recommendations.

The exemption requires fiduciary investment advice to be provided in accordance with the following “impartial conduct standards” to advance retirement customer protections: a best interest standard; a reasonable compensation standard; and a requirement to make no materially misleading statements about recommended investment transactions. The exemption includes other protections that would require disclosures to retirement investors, conflict mitigation and a retrospective compliance review. DOL said this approach further will preserve wide availability of investment advice arrangements and products for retirement investors.

The American Bankers Association expressed support for the exemption in its comment letter and made additional recommendations to accommodate bank-specific practices with respect to the provision of investment advice. In response to the ABA letter, DOL modified the certification and recordkeeping requirements to account for the distinct bank business model. The exemption takes effect 60 days after publication in the Federal Register.