Benefits and executive compensation partner Fred Reish spoke to Pensions & Investments about the Department of Labor’s (DOL) fiduciary investment advice, including its work on a new rule proposal and legal challenges on an investment-advice exemption and subsequent guidance.
Reish noted that the facts surrounding the debate have changed since the Fifth Circuit’s ruling in 2018. He pointed to 2019 guidance from the Securities and Exchange Commission (SEC) that applies a best-interest standard to broker-dealers and investment advisers for a single recommendation.
Regarding an SEC staff bulletin from March 2022, Reish said it aligns with the DOL’s new interpretation on rollovers. “The SEC saying that a single recommendation of a rollover, for example, by an investment adviser invokes a fiduciary standard, (and) by a broker-dealer invokes a best-interest standard, which is based on fiduciary-like principles, didn’t exist when the Fifth Circuit made its decision,” Reish explained. “The Fifth Circuit decision said, ‘Gee, not a whole lot has changed in the financial services industry since the 1970s,’ and this has changed things.”
Reish added, “It would be more difficult today to say that there haven’t been significant changes over the last 40-some-odd years, as the Fifth Circuit said in its (2018) decision,” due to the SEC guidance.
In conclusion, Reish stated that he thinks the DOL’s desire is to have a rule that parallels the SEC’s rules for investment advisers and broker-dealers, “which is that a single recommendation can be a fiduciary recommendation (and) does not require that advice be provided on a regular basis, but that any material recommendation could impact a plan or a participant would be fiduciary advice.”
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