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DOL Catches Many in Expanded Fiduciary Net; Is Proposed Exemption an Escape Hatch or a Trap Door?
21 April 2015
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The Department of Labor has again proposed to modify regulations under ERISA that will essentially deem every service provider that recommends an investment to an employee benefit plan, plan participant, IRA or IRA owner as a fiduciary.
This definition change will cause any commissions or other compensation that financial institutions and advisers receive based on any investment recommendation to be a prohibited act of self-dealing that can lead to material penalties and/or liabilities for such persons.
The DOL has proposed a class exemption that would allow for the receipt of such commissions and other compensation, but subject to the acknowledgement of fiduciary status and the satisfaction of conditions that may be impossible to satisfy, which likely will subject to the financial institutions and other advisers to the risk of significant litigation, including class actions.
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