March 4, 2010

DOL Issues Proposed Investment Advice Regulations

On February 26, 2010, the DOL issued proposed regulations and a  Fact Sheet relating investment advice.  Proposed regulations relating to investment advice were originally issued by the Bush Administration; and ultimately withdrawn altogether (see prior  Benefit Beat articles: Proposed Rules: Investment Advice Exemption for 401(K) Plans and IRAs and DOL Investment Advice Withdrawn Altogether).  These new proposed regulations are very similar to the original proposal, with a few important exceptions. 

Like the original proposed regulations, the newly issued regulations propose two types of investment advice: a computer model and a flat fee model.  

  • The regulations proposed to tighten the computer model design by limiting the factors that can be considered in developing a computer model.  Particularly controversial is the limitation on the use of performance history.  These regulations also restrict the provision of individualized fee-based advice following the use of a computer model. 
  • The regulations also intend to stiffen the rules relating to flat fee based investment advice.  

Finally, the regulations do not propose a class exemption for certain types of advice that was included in the Bush-era proposal. 

There are bound to be many comments relating to these regulations.  After the comments are analyzed by the DOL and final regulations are issued, stay tuned for further developments.


The information contained in this Benefit Beat is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations.

As required by U.S. Treasury rules, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained in this Benefit Beat is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service.

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