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Alert: DOL Releases Controversial Proposal, Signifying Regulatory Intent to Expand Fiduciary Standard

By Steve Fox, Jonathan Clark, and Tom Wagner

On April 14, 2015, the U.S. Department of Labor (“DOL”) released a controversial proposal that would require financial advisors to put their clients’ interests ahead of their own when recommending retirement investments. Businesses and financial advisors that manage retirement investment accounts should be aware of the new rule and how it might affect their business.

While speculation about the expansion of the so-called “Fiduciary Standard” has been rampant for years, yesterday’s release confirms that government regulators intend to expand the Fiduciary Standard. Specifically, the expansion will result in coverage of a larger number of financial advisors by closing two loopholes in the definition of “retirement investment advice.” Although firms would still be allowed to set their own compensation rates, the DOL’s proposed rule would:

  • Establish a best-interest contract exemption that would legally require brokers to act in their clients' best interest and;
  • Require brokers to disclose all conflicts of interest to their clients.

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