ERISA-DOL Will Re-Propose Its New Rule On Definition Of Fiduciary

According to a News Release (9/19/11), the Department of Labor (the “DOL”) will re-propose its new rule on the definition of a fiduciary for purposes of ERISA. The DOL had published a proposed rule on October 22, 2010, to change the definition to reflect the current market place. That rule would have significantly expanded the definition of fiduciary, and met with a lot of resistance. It appears, from the News Release, that the DOL wants more input from the public and other rule makers (e.g., the Securities and Exchange Commission and the Commodities Futures Trading Commission) and more time to review and consider a revised definition.

The News Release says that the DOL anticipates revising the definition of fiduciary so as to, among other things, clarify that fiduciary advice is limited to individualized advice directed to specific parties, respond to concerns about the application of the definition to routine appraisals and clarify the limits of the definition’s application to arm’s length commercial transactions, such as swap transactions. Also anticipated are the issuance of exemptions (presumably prohibited transaction class exemptions) addressing concerns about the impact of the new definition on the current fee practices of brokers and advisers, and clarifying the continued applicability of exemptions that have long been in existence that allow brokers to receive commissions in connection with mutual funds, stocks and insurance products. The re-proposal is expected to be issued in early 2012.

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