Regulatory Outlook | 02.17.21
DOL's New Fiduciary Position on Rollovers Likely to Land in Court
For the third time in five years, the Department of Labor (DOL) is adopting a new position on how to apply a fiduciary standard to advisory work on IRA rollovers. According to attorneys at Eversheds Sutherland, this interpretation is likely to wind up in court. The DOL is embracing a position that rollover advice is fiduciary investment advice “if it entails disposition of investments in a retirement investor’s current retirement arrangement and acquisition of investments in the new arrangement and satisfies the five-part test of fiduciary status laid out in [the] DOL’s 1975 ERISA regulation.” This definition is not limited to investments that are regulated as securities. It also applies to any asset or property of the retirement plan or IRA, the attorneys said. For instance, this new interpretation forbids an advisor who recommends the purchase or sale of a proprietary mutual fund's shares to charge a sales commission or surrender charges or duplication of an advisory fee. It also requires the advisor to seek independent fiduciary approval for proprietary products.
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