September 13, 2022

What Broker-Dealers Need to Know About Correcting PTE 2020-02 Mistakes

Broker Dealer Law Blog

The DOL expanded its interpretation of fiduciary advice in the Preamble to PTE 2020-02 and as a result, many more broker-dealers and their registered representatives (investment professionals) are fiduciaries for their recommendations to retirement investors, including rollover recommendations. Therefore, they will need the protection provided by PTE 2020-02. The PTE contains a number of conditions and if those conditions are not met, a prohibited transaction will result.

The good news is that the PTE provides a self-correction process. Unfortunately, some conditions of the self-correction process are difficult to interpret and additional DOL guidance is needed.

To avoid these challenges, broker-dealers should implement good processes and documentation to satisfy the PTE conditions and closely supervise their investment professionals to ensure that the processes are followed.

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