Best Interest Standard of Care for Advisors #35

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Comparing the DOL Proposal to the Broker-Dealer and RIA Standards of Conduct

Broker-dealers and investment advisers are now governed by a best interest standard of care. Those standards are based largely on the same fiduciary principles that are incorporated into the ERISA prudent man standard. The DOL recently extended the ERISA standard to an expanded definition of fiduciary status in a new interpretation found in the preamble to its proposed Prohibited Transaction Exemption (PTE) for advice to plans, participants and IRAs. Among the conditions in the PTE is a requirement that advisors adhere to a best interest standard of care which, like its broker-dealer and RIA counterparts, is a combination of a duty of care and a duty of loyalty. This continues the convergence of the fiduciary standards for investment advisers and fiduciary advisors and the fiduciary-like standard for broker-dealers.

My colleagues, Joan Neri and Bruce Ashton, and I have recently written an article describing the similarities (and some differences) among those three pieces of guidance. The article includes a chart, which should make it easier to compare the different relevant provisions from the guidance.

Read the Full Article

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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