DOL Adopts Final Regulation on Exemption for Participant-Level Investment Advice

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The U.S. Department of Labor (DOL) has adopted a final regulation to implement the statutory exemption from the prohibited transaction rules of the Employee Retirement Income Security Act of 1974, as amended (ERISA), for the provision of investment advice to plan participants and beneficiaries and owners of individual retirement accounts (IRAs). Under this rule, a financial services firm, such as a registered investment adviser, bank, or registered broker-dealer, may provide advice on investments in its proprietary investment products, or on other investments that would result in fees or other payments to the firm, if the firm complies with a fee-leveling requirement or the advice is furnished using a certified computer model. The effective date of the final regulation is December 27, 2011.

This LawFlash provides a brief overview of the statutory exemption and the final regulation and highlights some of the main issues raised by the comments. The concluding section offers some observations about the practical impact of the regulation and the current status of the law on participant investment advice.

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