ERISA’s Fiduciary “Investment Advice” Rules
June 21, 2019
Date | Executive Order on Enforcing the Regulatory Reform Agenda dated February 24, 2017, requires each agency to establish a Regulatory Reform Task Force that will, at a minimum, attempt to identify regulations that: (i) eliminate jobs, or inhibit job creation; (ii) are outdated, unnecessary, or ineffective; (iii) impose costs that exceed benefits; (iv) create a serious inconsistency with regulatory reform initiatives and policies; (v) are inconsistent with section 515 of the Treasury and General Government Appropriations Act or the guidance thereunder; or (vi) derive from or implement other Executive Orders or Presidential Directives that have been subsequently rescinded or substantially modified. Each Task Force is required to provide the agency head a report detailing the progress within 90 days of the order. The order extends to, among other agencies, the Department of Labor. Read More |
Date2/3/2017 | Presidential Memorandum dated February 3, 2017. Provides for the Department of Labor to conduct an economic and legal analysis of the regulation and rescind the rule if, among other things, it is inconsistent with the Administration's priorities. |
Date | The House Appropriations Committee on July 12, 2017 released the draft fiscal year 2018 Labor, Health and Human Services, and Education funding bill, which includes funding for programs within the Department of Labor. The draft bill includes a provision that would cause the Department of Labor’s new Fiduciary Rule to be of no force or effect. Read More |
Date6/8/2017 | Affordable Retirement Advice for Savers Act (H.R. 2823), sponsored by Rep. Phil Roe (R-TN), would amend ERISA and the Internal Revenue Code to establish a statutory definition of “investment advice” under the applicable fiduciary provisions. The bill was introduced in the House on June 8, 2017 and was subsequently approved by the Education and the Workforce Committee on July 19, 2017 by a vote of 23-17. |
Date6/8/2017 | Affordable Retirement Advice Protection Act (S. 1321), sponsored by Sen. Johnny Isakson (R-GA), would amend ERISA to establish a statutory definition of “investment advice” under the applicable fiduciary provisions. The bill was introduced in the Senate on June 8, 2017. |
Date4/26/2017 | The Financial CHOICE Act of 2017 (H.R. 10), sponsored by Rep. Jeb Hensarling (R-TX), would, among other things, repeal the Department of Labor's new Fiduciary Rule, require further rulemaking on the point to await and be coordinated with similar SEC rulemaking and provide specified standards to be applicable to SEC rulemaking regarding certain fiduciary matters. The bill was introduced in the House of Representatives on April 26, 2017 and was subsequently approved by the House Financial Services Committee on May 4, 2017 by a vote of 34-26. Read More |
Date1/6/2017 | On January 6, Rep. Joe Wilson (R-SC) introduced a bill that would delay the implementation of the DOL Fiduciary Rule for two years after the enactment of his proposed legislation. |
Date | The U.S. Department of the Treasury issued a report on October 27, 2017, pursuant to Executive Order 13772, titled “A Financial System that Creates Economic Opportunities, Asset Management and Insurance,” which addresses, among other things, the Fiduciary Rule. The report (i) provides that the Treasury Department supports the DOL’s efforts to reexamine the implications of the Rule and to delay full implementation “until the relevant issues . . . are evaluated and addressed to best serve investors, and believes that such assessment and resolution of standard of conduct issues should include participation by the SEC and other regulators,” (ii) addresses administrative oversight over the standards of care applicable to the annuities market and (iii) recommends that the DOL and the SEC “engage with state insurance regulators regarding the impact of standards of care on the annuities market . . . in order to achieve consistent standards of conduct across product lines.” Read More
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Date2/2/2017 | Letter from Rep. Sessions (Chair. of the House Comm. on Rules) to Pres. Trump urging an immediate announcement of a delay in the applicability of the fiduciary rule (Feb. 2, 2017). |
Date12/14/2016 | Report of the House Freedom Caucus (Dec. 14, 2016) recommendation #138 (remove “Definition of the Term ‘Fiduciary’; Conflict of Interest Rule – Retirement Investment Advice” at 29 CFR 2510.3-21(c))). |
Date | Decision in Chamber of Commerce v. Alexander Acosta, Secretary of Labor, dated May 22, 2018, in which the U.S. Court of Appeals for the Fifth Circuit denied motions made by the States of California, New York and Oregon to (i) reconsider the Court’s earlier denial of the States’ motion for leave to intervene in the underlying action (in which the Fifth Circuit vacated the DOL Fiduciary Rule) and (ii) permit the filing of a petition for rehearing en banc seeking review of the Court’s order decision the motion to intervene. Read More |
Date5/2/2018 | Decision in Chamber of Commerce v. Alexander Acosta, Secretary of Labor, dated May 2, 2018, in which the U.S. Court of Appeals for the Fifth Circuit denied motions made by the States of California, New York and Oregon, and by the AARP, for leave to intervene in the underlying action in which the Fifth Circuit vacated the DOL Fiduciary Rule. Read More |
Date3/15/2018 | Opinion in Chamber of Commerce v. Alexander Acosta, Secretary of Labor, dated March 15, 2018, in which the U.S. Court of Appeals for the Fifth Circuit reversed the ruling of the U.S. District Court for the Northern District of Texas, and vacated the DOL Fiduciary Rule, finding that the DOL had exceeded its regulatory authority in promulgating the rule and that the rule’s definition of “fiduciary” was unreasonable. Read More |
Date2/21/2017 | Order dated February 21, 2017, in Thrivent Financial v. Edward Hugler, in which Judge Susan Richard Nelson of the U.S. District Court for the District of Minnesota denied the DOL’s request for a stay in the proceedings while the DOL reviews the issues raised in the President’s Memorandum of February 3.
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Date2/17/2017 | Opinion in Market Synergy Group v. U.S. Dep’t of Labor dated February 17, 2017, in which the U.S. District Court for the District of Kansas upheld the DOL’s amended Prohibited Transaction Exemption 84-24, which was issued in connection with the DOL’s New Fiduciary Rule. |
Date2/8/2017 | Opinion in Chamber of Commerce v. Edward Hugler, Acting Secretary of Labor dated February 8, 2017, in which Chief Judge Barbara M.G. Lynn of the United States District Court for the Northern District of Texas denied the plaintiffs’ motion for summary judgment and upheld the DOL Fiduciary Rule. The court also denied the defendants’ motion, submitted on February 8, to stay the proceedings while the DOL reviews the issues raised in the Presidential Memorandum of February 3. The DOJ's motion states that the DOL is assessing its legal options for delaying the applicability date of the rule. On February 24, the plaintiffs filed a notice of appeal, and then, on March 11, moved for an injunction to block the rule pending the appeal, which the district court denied on March 14. On March 21, the plaintiffs filed an emergency motion with the Fifth Circuit seeking an injunction to block the rule pending appeal, or alternatively expediting the appeal. On March 29, defendants filed its opposition. On April 5, the Fifth Circuit denied both motions. Read More |
The list below includes some of the state and industry-level initiatives that would seek to impose fiduciary-like obligations on financial-services organizations, following the failed attempt by the U.S. Department of Labor (DOL) to amend ERISA's “investment advice” fiduciary rule. Our OnPoint relating to efforts by the states to adopt fiduciary-type rules may be found here, and our resource page collecting our OnPoints relating to the DOL's efforts to adopt an amended fiduciary rule may be found on Dechert's Fiduciary Rule Resource Page.
State | Name | Description |
Massachusetts | Proposed Regulations – Fiduciary Conduct Standard Applies to:Broker-dealers, agents, investment advisers, and investment adviser representatives. | The Massachusetts Securities Division has circulated for preliminary comment a proposed regulation that would impose a fiduciary conduct standard on investment advisers, investment adviser representatives, Status/NotesThe last day to submit written comments to the Office of the Secretary of the Commonwealth was July 26, 2019. |
| New Jersey | Fiduciary Duty Applies to:Broker-dealers, agents, investment advisers, and investment adviser representatives. | The New Jersey Bureau of Securities has proposed a rule that describes what constitutes a “recommendation,” imposes a uniform “fiduciary standard” on brokers and advisers, and creates a presumptive breach if the affected broker does not “recommend” the best reasonably available option and fee arrangement. Failure to act in accordance with a fiduciary duty to a customer when providing investment advice or when making a recommendation for an investment strategy, the opening of, or transfer of assets to, any type of account, or the purchase, sale or exchange of any security, would be a dishonest or unethical business practice. To satisfy the fiduciary duty, a broker-dealer, agent, or adviser must satisfy both a duty of care and a duty of loyalty. Status/NotesComments on this proposed rule were originally due by June 14, 2019. The comment period was extended to July 18, 2019. In addition, the New Jersey Bureau of Securities held a public hearing in connection with the notice of proposal on July 17, 2019. Rule Proposal Reporter: 51 N.J.R. 493(a) Statement of Kevin Carroll On Behalf of the Securities Industry and Financial Markets Association Testimony of the Insured Retirement Institute Testimony of David T. Bellaire, Esq. On Behalf of the Financial Services Institute. |
| Nevada | An Act relating to financial planners . . . Applies to:Any broker-dealer, sales representative, investment adviser or representative of an investment adviser. | Revises the definition of “financial planner” in the state’s existing fiduciary law to include broker-dealers, sales representatives, investment advisers or representatives of an investment adviser. Existing Nevada law provides as follows: "A financial planner has the duty of a fiduciary toward a client. A financial planner shall disclose to a client, at the time advice is given, any gain the financial planner may receive, such as profit or commission, if the advice is followed. A financial planner shall make diligent inquiry of each client to ascertain initially, and keep currently informed concerning, the client’s financial circumstances and obligations and the client’s present and anticipated obligations to and goals for his or her family." Status/NotesEnacted. 383, 2018 Leg., 79th Sess. (Nev. 2017). Draft regulations released January 18, 2019 |
| Connecticut | An Act requiring administrators of certain retirement plans to disclose conflicts of interest Applies to:Any company that administers a retirement plan offered by a political subdivision of the state to the employees of such political subdivision. | Any company that administers a retirement plan offered by a political subdivision of the state must disclose the fee ratio and return, net of fees for each investment under the plan; and the fees paid to any person who, for compensation, engages in the business of providing investment advice to participants in the plan. Status/NotesEnacted. |
| New York | Suitability and Best Interests in Life Insurance and Annuity Transactions Applies to:Any insurance producer or insurer. | Sellers of insurance and annuity products in the state are required to only consider their clients' best interests when recommending life insurance and annuities. Contains exemptions for policies and contracts that fund ERISA and other plans. Status/NotesThis regulation is adopted with an effective date of Aug. 1, 2019. Final Adoption of First Amend. to N.Y. Comp. Codes R. & Regs. Tit. 11, section 224 |
| New York | Investment Transparency Act Applies to:Investment advisors currently not subject to a fiduciary standard under existing state or federal laws or regulations. "Non-fiduciary investment advisors" include, but are not limited to, individuals and institutions that identify themselves to consumers as "brokers," "dealers," "investment advisors," "financial advisors," "financial planners," "financial consultants," "retirement planners," "retirement brokers," "retirement consultants," or by any other term that is suggestive of investment, financial planning, or retirement planning knowledge or expertise. | Non-fiduciary investment advisors shall make a plain language disclosure to clients orally and in writing at the outset of the relationship that ensures that individual investors are aware of potential conflicts of interest. Such required disclosure shall state the following: "I am not a fiduciary. Therefore, I am not required to act in your best interests, and am allowed to recommend investments that may earn higher fees for me or my firm, even if those investments may not have the best combination of fees, risks, and expected returns for you." A copy of such disclosure shall be provided to the client, and a signed acknowledgment by the client that such disclosure was provided must be maintained by the non-fiduciary investment advisor. Any investment brochures, advertising materials, or other related printed information provided to clients, or any subsequent oral investment advice to them, must also include such disclosure. Investment advisors that are subject to a fiduciary duty with respect to certain types of investment advice, but not others, must disclose in plain language the extent to which the fiduciary duty does and does not apply. Status/NotesProposed in the House of Assembly. |
| Maryland | Financial Consumer Protection Act of 2019 Applies to:Investment advisors, broker-dealers, broker-dealer agents, insurance agents, covered advisers and investment adviser representatives. | Specified financial professionals are fiduciaries and have a duty to act in the interest of the customer without regard to the financial or other interest of the person or firm providing advice. Status/NotesS.B. 786, 2019 Leg. Reg. Sess. (Md. 2019). In January of 2019, the Maryland Financial Consumer Protection Commission issued a report recommending that the Maryland General Assembly “pass legislation that provides that broker-dealers, broker-dealer agents, insurance producers, investment advisers, or investment adviser representatives who offer advisory services or hold themselves out as advisors, consultants, or as providing advice, would be held to a fiduciary duty to act in the best interest of the customer without regard to the financial or other interest of the person or firm providing the advice.” On April 3, 2019, the bill received an “Unfavorable Report” by the Maryland Senate Finance Committee. The bill was not passed and the legislative session ended on April 8, 2019. |
| New Jersey | An Act concerning non-fiduciary investment advisors and supplementing Title 56 of the Revised Statutes Applies to:"Non-fiduciary investment advisor" means any individual or institution that advertises or uses in self identification any term that is suggestive of investment, financial planning, or retirement planning knowledge or expertise, including, but not limited to, broker, dealer, investment advisor, financial advisor, financial planner, financial consultant, retirement planner, retirement broker, or retirement consultant. "Non-fiduciary investment advisor" shall not include investment advisors that are subject to a fiduciary duty under existing State or federal law or regulation or by applicable standards of professional conduct. | Generally the same requirements as the New York Investment Transparency Act. Status/NotesIn Committee. |
| Illinois | Investment Advisor Disclosure Act Applies to:Text of the bill is not yet written. | Text of the bill is not yet written. Status/NotesIn Committee. |
| NAIC (National Association of Insurance Commissioners) | Suitability in Annuity Transactions Model Regulation (#275) Applies to:Insurance producers and insurers. | The most recent draft of model regulation would prohibit an insurance producer or insurer from placing its financial interest above the consumer’s interest when making a recommendation of an annuity product, but would not cause any insurance producer or insurer to be treated as a fiduciary or impose a duty of loyalty. |
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