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IPA Responds to DOL Fiduciary Exemption Proposal on Investment Advice for Workers and Retirees


The IPA yesterday submitted a to the Department of Labor’s (DOL) proposed class exemption Improving Investment Advice for Workers and Retirees. The IPA believes a workable exemption modeled after the Securities and Exchange Commission’s (SEC) Regulation Best Interestserves the interests of retirement savers by ensuring they receive high-quality advice.

The proposed exemption seeks to restore the DOL’s long-standing “Five-Part Test” for determining fiduciary status under the Employee Retirement Income Security Act (ERISA). The IPA is concerned, however, that the proposal departs too far from Regulation Best Interest and that the preamble attempts to amend the Five-Part Test in a manner that is inconsistent with the Administrative Procedures Act (“APA”) and the Fifth Circuit’s decision to overturn the 2016 fiduciary rule in Chamber of Commerce v. Acosta.

The IPA made the following comments:

Fiduciary Status

When the Department reinstated the Five-Part Test to determine if someone is an investment advice fiduciary, it should reinstate that test as it has been understood for the past 45 years. The Department should withdraw or clarify language in the preamble that would have the effect of subjecting more recommendations to ERISA’s fiduciary standard. Our comments are consistent with the APA and the Fifth Circuit’s decision which required the Department to reinstate the Five-Part Test.

Proposed Exemption

The IPA encourages the DOL to complete its rulemaking and issue an exemption modeled on the Regulation Best Interest. As the DOL looks to harmonize an updated exemption, the IPA additionally asks that the below five criteria be modified from the current proposal:

    1. An investment professional should not be required to provide ongoing monitoring services in order to recommend a complex product.
    2. An investment professional should not be required to acknowledge fiduciary status in order to use the proposed exemption.
    3. If the DOL requires an annual audit and certification, it should be modeled after FINRA Rule 3130(c)(3).
    4. The DOL should remove the provision giving it the power to bar investment professionals and financial institutions from using the proposed exemption.
    5. The DOL should provide a mechanism for correcting good faith errors made by investment professionals and financial institutions that use the exemption.

The IPA looks forward to working with the DOL on its final rule making. If you have any questions, please don’t hesitate to reach out to Tony or me.

Thank you,

Anya Coverman
SVP, Government Affairs and General Counsel
Institute for Portfolio Alternatives