Clifford Chance

U.S. Department of Labor Finalizes Fiduciary Rule

12 April 2016

On April 6, 2016, the U.S. Department of Labor issued its long-awaited final regulation re-defining what it means to be an "investment advice fiduciary" under the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code. The Final Rules significantly expand the class of advisers and the scope of investment advice that are subject to fiduciary standards and impose the same fiduciary standards on advisers to individual retirement accounts that have long applied to plans covered by ERISA.
 

The DOL also finalized certain prohibited transaction exemptions which allow investment advisers to receive compensation for providing investment advice under arrangements which would otherwise be prohibited due to certain conflict of interest rules. Most notably, these exemptions include the so-called "Best Interest Contract Exemption" which provides relief from the prohibited transaction rules where a fiduciary concludes that the investment advice is in the "best interest" of the plan or IRA (and satisfies certain additional requirements). Included below is a summary of the significant changes between the Final Rules and the final BIC Exemption and the proposed regulations and exemptions that were issued by the DOL last April.

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