Even More Regulation

The SEC is not the only regulator cogitating about new rules and regulations that may affect brokers and investment advisors. The DOL’s also been busy. It recently proposed expanding the definition of the term “fiduciary” under ERISA. Blaine Aiken, CEO of Fiduciary360, in his Fiduciary Corner column in Investment News wrote that according to DOL, the rule “would protect beneficiaries of pension plans and individual retirement accounts by more broadly defining the circumstances under which a person is considered to be a fiduciary by reason of giving investment advice to an employee benefit plan or a plan’s participant.” According to Mr. Aikin, the goal is not to hinder traditional brokerage services but rather “to prevent those who provide advice and are perceived by clients as being impartial but who seek to avoid fiduciary accountability through a technicality – specifically, an unworkably narrow definition of ‘fiduciary’ under ERISA.” The major changes would be to:

  • Remove the requirement that advice be “regular”. Mr. Aikin says, “The DOL correctly asserts that investors have the same high expectation regarding the competence and impartiality of their financial adviser, regardless of whether the advice is rendered only once or on a continuing basis.”
  • An advisor would be considered a fiduciary regardless of whether the advice was deemed to be the “primary basis” for the investment decision [the current standard]
  • Extend the definition of “fiduciary” to the provision of advice to holders of IRA accounts.
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