DOL Issues New Guidance Regarding Who Is an Investment Advice Fiduciary and a New Related Class Prohibited Transaction Exemption
On June 29, 2020, the Department of Labor (the “DOL”) announced two actions with respect to the regulation of investment advice under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and the Internal Revenue Code of 1986, as amended (the “Code”). First, the DOL submitted a technical amendment to the Code of Federal Regulations to revert to the 1975 regulation defining who is an investment advice fiduciary in response to the U.S. Court of Appeals for the Fifth Circuit vacating the regulations that were finalized in 2016. Second, the DOL proposed a new prohibited transaction class exemption for investment advice fiduciaries (“Proposed Class Exemption”) aligning requirements in the exemption with those of other regulators. In the preamble to the Proposed Class Exemption, the DOL espoused certain viewpoints regarding the application of the 1975 regulation. Most notably, the DOL abandoned its earlier position that giving advice to roll assets out of an ERISA covered employee benefit plan (“ERISA Plan”) to an individual retirement account (“IRA”) does not constitute investment advice.