From Kevin Miller of Alston & Bird, a member of our Advisory Board:
Last Thursday, the Department of Labor proposed regulations that would, if adopted, significantly expand the circumstances in which a person will be treated as a fiduciary under ERISA by reason of providing investment advice for a fee to an employee benefit plan. The proposed regulation was published in the Federal Register on October 22nd – the comment period expires on January 20th.
Specifically, under paragraph (c)(1)(i)(A) of the proposal, the types of advice and recommendations that may result in fiduciary status under ERISA Section 3(21)(A)(ii) are: Advice, appraisals or fairness opinions concerning the value of securities or other property; recommendations as to the advisability of investing in, purchasing, holding, or selling securities or other property; or advice or recommendations as to the management of securities or other property.
While the proposal contains a number of exceptions that may be available in specific circumstances, it otherwise significantly expands the situations in which a financial advisor will be treated as an ERISA fiduciary for providing investment advice to an employee benefit plan, a plan fiduciary or a plan participant – even on a one-off basis and where there is no understanding that the advice will be the primary basis for an investment decision.