Jim Podheiser on state of play re. prohibited transaction exemption relief for investment advice

“With the DOL’s fiduciary rule and the new and amended exemptions associated therewith (the “Rule”) officially vacated, many are wondering about the implications of the DOL’s last statement of its (and the IRS’) temporary enforcement policy (FAB 2018-02).  In the absence of the Rule we are back to the old “5-part test” for determining whether one is an investment advice fiduciary.  If one is an investment advice fiduciary under the 5-part test, the temporary enforcement policy would seem to provide what is the equivalent of a prohibited transaction exemption that did not exist prior to the Rule (for example, to permit the investment advice fiduciary to receive third-party compensation assuming the “impartial conduct standards” are satisfied).  Whether the DOL would agree with this analysis in all cases and how long this temporary enforcement policy will be maintained remains to be seen.”

George Michael Gerstein advises financial institutions on the fiduciary and prohibited transaction provisions of ERISA. As co-chair of the fiduciary governance group, he assists clients with tracking, and understanding, the numerous fiduciary developments at the federal and state levels, including the rules and regulations of governmental plans. He also advises clients with respect to the fiduciary duty implications of ESG investing.