The Securities Compliance Podcast Season 5 Episode 9 – DOL Fiduciary Rule Update: Where Are We Now and Best Practices for Retirement Investors

Podcast

Securities Compliance Podcast: Compliance in Context

11.08.2024

In Season 5 Episode 9 of The Securities Compliance Podcast: Compliance in Context, host and Calfee Partner Patrick D. Hayes features a Lessons From The Front Lines episode where he welcomes an august panel to provide an in-depth look at the embattled DOL Fiduciary Rule, including where are things currently stand, what's next, and what other best practices firms should have in place regarding any investment recommendations being made and other services provided to retirement investors. The episode's panel of experts includes Jason Berkowitz with the Insured Retirement Institute, David Kaleda with the Groom Law Group, and Jason Roberts with the Pension Resource Institute.

Show

Interview with Jason Berkowitz, David Kaleda, and Jason Roberts

• Reviewing the current state of the DOL Fiduciary Rule.

• Is there a path where the DOL gets the decision reversed or where PTE 2020-02 gets separated out?

• With the recent DOL Fiduciary Rule getting stayed, where does that leave ERISA investment fiduciaries? What is the status quo?

• Understanding the 1975 regulation and PTE 2020-02.

• What is the impact of the Florida district court ruling?

• Best practices around providing investment recommendations to retirement investors.

• What can compliance officers build into their programs now to ensure compliance with PTE 2020-02?

• What about disclosures for IRAs to IRAs?

• What about the annual review?

• Reviewing Reg BI, NAIC and the full regulatory framework and the related obligations for market participants.

• What is the current state of enforcement in this area?

Quotes

05:57 - "Let me just start with a quick overview of what the regulatory package is, that was adopted earlier this year. It included four components. The first component is a change in the definition of who is a fiduciary under ERISA. And, then, the other three changes, or the other three components, rather, were changes to what are called prohibited transaction exemptions, which are essentially the rules that ERISA fiduciaries have to follow in order to receive compensation for their services. And, in effect, essentially the way that, at least for my organization and our members, we look at this final regulatory package as significantly expanding the reach of fiduciary status to reach almost any financial professional who interacts in any way with a retirement saver and create significant new burdens and hassles for those individuals in order to get paid." - Jason Berkowitz

09:18 - "So, at this point, we're still waiting to see how this will be resolved. There are really two tracks here. One is just this effective date stay, and the other the next track is the merits of the case, whether the DOL even has the authority to do this in the first place. So the DOL did file a notice of interlocutory appeal, which basically means they're appealing the stay at this point and also all the parties had been working on a decision on the underlying regulation and exemptions that's being put on hold so that the DOL can at least consider what they're going to appeal. At this point, they've just noticed the court that they could appeal. Whether they do or not, I guess, remains to be seen." - David Kaleda

10:38 - "The part of the rulemaking package included amendments to Preventative Transaction Exemption PTE 20-02. The legacy 20-02 is still on the books. Same with 84-24, sweeping changes to 84-24 had been finalized, but not yet effective. The legacy 84-24 is still on the books. And then the definition of investment advice for determining what activities will give rise to fiduciary status under a risk and the tax code that definition is still on the books. It's the definition that's been on the books since 1975, with the exception of that brief period where we did have that 2016 conflicts of interest regulation defining the term investment advice but the reason I mentioned that is, I think there has been a tendency for firms to dial back or feel like the authority of the DOL writ large is being questioned and I think, at least from where I'm sitting, we've seen a steady tick and more proactive enforcement, where the DOL traditionally investigates plans." - Jason Roberts

13:57 - "The '75 regulation was an out of the passage of ERISA. ERISA says there's three different ways one can become a fiduciary. The two that are most relevant to our listeners, your listeners here today are investment and exercising control over the management of plan assets or investment advice, discretion, when you see it, right? So you don't just trip and fall into a discretionary relationship. Investment advice, though, means a lot of different things to a lot of different people. So in 1975, we have the implementing regulations defining, among other things, what constitutes investment advice. It's a five-part test, but if you meet that five-part test and you're compensated then you're considered to be sharing. By the way, this definition extends to IRAs and other non-ERISA plans through the tax code and its probe to transactions. Something I think that's important that a lot of people that we're going to need to appreciate as we get deeper into this conversation, so I'll at least put it out there now, is the for-compensation prong is broadly construed." - Jason Roberts

About the Securities Compliance Podcast: Compliance in Context

Introducing the Securities Compliance Podcast: Compliance in Context presented by Calfee, Halter & Griswold, and the National Society of Compliance Professionals and hosted by Patrick D. Hayes, Partner and Chair of Calfee's Investment Management practice.

Designed as a personal master class for the securities legal and compliance professional, this podcast embodies Patrick's passion to help you put Compliance In Context™ by combining the technical expertise of industry thought leaders and innovators with the practical experience of doers and key decision makers.

Listeners will find the podcast on Apple Podcast, Google Podcast, Spotify, and Stitcher.

The opinions expressed by guest speakers and panelists during Securities Compliance Podcasts may not necessarily reflect the viewpoints of the attorneys and professionals of Calfee, Halter & Griswold LLP, or its subsidiaries or affiliates. Calfee's educational content is intended to inform and educate readers about legal developments and is not intended as legal advice for any specific individual or specific situation. Please consult with your attorney regarding any legal questions you may have. With regard to all content including case studies or descriptions, past outcomes do not predict future results.

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