DOL Proposed Class Exemption

On August 22, 2008, the Department of Labor (DOL) proposed a class exemption for the provision of investment advice to participants and beneficiaries of self-directed account plans and IRAs. The rule would permit, among other things, the provision of investment advice described in section 3(21)(A)(ii) of the Employee Retirement Income Security Act of 1974 by a fiduciary adviser (or any employee, agent, registered representative, or affiliate thereof) to a participant or beneficiary in an individual account plan or individual retirement accounts (and certain similar plans).

CFP Board submitted comments to the DOL in a letter dated October 6, 2008. In its letter, CFP Board supported the DOL’s proposal to exempt from ERISA restrictions individualized investment advice by fiduciary advisers to participants and beneficiaries of participant-directed individual account plans or individual retirement accounts. CFP Board noted that the intent of the proposed exemption—to increase the availability of individualized investment advice—is consistent with its mission to increase the public’s access to competent and ethical financial planning.

CFP Board supported the disclosure requirements, which generally track the requirements in CFP Board’s Rules of Conduct. In addition, CFP Board noted two specific proposed requirements that may undermine the intent of the proposed exemption and urged the DOL to consider modifications. Specifically, CFP Board urged the DOL to eliminate or modify a requirement that participants or beneficiaries receive specific computer-generated recommendations before they could receive individualized advice. CFP Board further urged the DOL to modify an annual audit requirement in a manner that would not unduly burden small fiduciary advisers.

The DOL’s release regarding the final rules is available here. The effective applicability date of the final rules has been delayed until November 18, 2009, to allow additional time for the DOL to evaluate questions of law and policy concerning the rules.