The DOL Fiduciary Rule – Action Steps for Investment Managers

May 26, 2017

The new Department of Labor fiduciary rule (the “Fiduciary Rule”) will be applicable on June 9, 2017. If you have not already done so, you need to address these rule changes as they relate to ERISA plans and individual retirement accounts (IRAs) regarding:

  • Post June 9th subscriptions for private fund investments;
  • Separately Managed Accounts that use brokers/dealers affiliated with the investment manager, or invest in mutual funds affiliated with the investment manager; and
  • Holistic advice that advises on ERISA plan rollovers to an IRA.

Private Fund Subscriptions and Additions

Accepting a new or additional investment from an ERISA plan or IRA after June 9, 2017 will be a fiduciary act; unless, the ERISA plan or IRA is “Professionally Advised”. To be Professionally Advised the ERISA plan’s or IRA’s investment in the private fund must be directed by or based on advice from an independent bank, insurance company, registered investment adviser or registered broker-dealer, or in the case of an ERISA plan that is not participant directed, the independent fiduciary directing the investment in the fund has more than $50 million in assets under its management or control.

  • If you have not begun incorporating the “ADDITIONAL BENEFIT PLAN INVESTOR REPRESENTATIONS WITH RESPECT TO THE DOL ADVICE FIDUCIARY RULES” into your fund’s subscription agreements and additional investment forms please call your contact at Seward & Kissel.
  • If you plan to continue to accept Non-Professionally Advised plans and/or IRAs after June 9, 2017, please call your contact at Seward & Kissel immediately as you will need to take additional steps, including the adoption of Policies and Procedures to address compliance with the “Impartial Conduct Standards”.

Separate Accounts

After June 9, 2017, requirements of the class exemptions that permit a fiduciary (discretionary or advisory) to use an affiliated broker/dealer (PTE 86-128) or to invest the account in an affiliated mutual fund (PTE 77-4) have been expanded.

  • The authorization and reporting requirements of PTE 86-128 will apply to IRAs, however, if the authorization and reporting package is sent to existing IRA clients before June 9th, negative consent is permitted.
  • The use of the affiliated broker/dealer must meet the Impartial Conduct Standards.
  • If you exercise discretion to invest ERISA plan or IRA assets in an affiliated mutual fund, you must meet the Impartial Conduct Standards.
  • If you utilize an affiliated broker/dealer or invest in an affiliated mutual fund, please call your contact at Seward & Kissel immediately as you will need to adopt Policies and Procedures to address compliance with the “Impartial Conduct Standards”.

Distribution and Other Arrangements

The Fiduciary Rule affects many arrangements that a financial firm has with its ERISA plan and IRA clients; you should consider how your firm interacts with ERISA plans and IRAs. For example:

  • If you participate in a distribution platform or similar arrangement, you should review the arrangement and determine if ERISA plans and/or IRAs are potentially included on the platform and if so call your contact at Seward & Kissel to determine whether obtaining deemed representations from the platform provider would be appropriate.
  • If you provide model portfolios you should review the arrangement and determine if ERISA plans and/or IRAs are potentially provided the model portfolio and if so call your contact at Seward & Kissel review the fee arrangements and determine whether additional representations would be appropriate.
  • If you provide clients with holistic investment services, any recommendation to rollover assets from an ERISA plan to an IRA will constitute fiduciary advice subject to the Impartial Conduct Standards.

After June 9, 2017 until January 1, 2018, these transition rules will be in effect. During this period, the DOL will continue to reevaluate the Fiduciary Rule, and may extend the transition period or revise these rules. Seward & Kissel will continue to monitor the progress of Fiduciary Rule and alert you to any changes that occur.


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