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Compliance and Regulatory Alerts  |  11-04-21

DOL Extends Non-Enforcement Compliance Relief for Certain Prohibited Transaction Exemptions

In a Field Assistance Bulletin (“FAB”) issued on October 25, 2021, the Department of Labor (“DOL”) extended relief through Jan. 31, 2022 on a Prohibited Transaction Exemption (“PTE”), titled "Improving Investment Advice for Workers and Retirees,” that went into effect on February 16, 2021. The DOL’s PTE is offered to registered investment advisers, broker dealers, financial institutions, and insurance companies that “provide fiduciary investment advice to Retirement Investors” (e.g., Plan participants and beneficiaries, IRA owners and Plan and IRA fiduciaries).

As Bates has previously described, the institutions and professionals who fall under the exemption can receive certain types of compensation, including transaction payments and fees that are currently prohibited under ERISA law. These may include “commissions, 12b-1 fees, trailing commissions, sales loads, mark-ups and mark downs, and revenue sharing payments from investment providers or third parties.” The exemption also applies to advice provided on Plan roll-overs in addition to allowing financial institutions to transact to, or from, their own accounts.

Reliance on the exemption by eligible investment advice fiduciaries requires compliance with several conditions, like meeting "Impartial Conduct Standards" (which includes Regulation Best Interest, reasonable compensation, disclosing material conflicts of interest and that the provider of the advice is a fiduciary, among others). The effective date of the exemption was February 16, 2021, but the Department of Labor provided “transitional relief through Dec. 20, 2021,” to allow affected advisers more time to comply with many of the exemption’s conditions.

Under the new Field Assistance Bulletin, the DOL extended that transitional relief through Jan. 31, 2022. In so doing, the DOL stated that: (i) it “will not pursue prohibited transaction claims against investment advice fiduciaries who are working diligently, and in good faith, to comply with the Impartial Conduct Standards, for transactions exempted in PTE 2020-02;” (ii) it “will not treat such fiduciaries as if they were violating the applicable prohibited transaction rules;” and (iii) as to documentation and disclosure requirements on rollovers, it will not treat the fiduciary as violating the PTE provisions through June 30, 2022. The extension of the non-enforcement policy is intended to allow financial institutions and professionals time to ensure the development of processes necessary to provide the requisite compliance.

How Bates Helps

Bates Compliance provides tailored solutions for financial institutions and investment advisers. Our compliance team includes senior compliance staff and former regulators, with expertise in the development of policies, procedures, supervisory and compliance processes, including in state and federal registration, supervision and oversight, recordkeeping, and disclosure.

David Birnbaum, Managing Director, | 917-273-2682

Hank Sanchez, Managing Director, | 504-450-9632

Rory O'Connor, Director, | 860-671-7270


For additional information and assistance, please follow the links below to Bates Group's Practice Area pages:

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Contact Bates Group

Bates Group is with you every step of the way. Contact us today for more information on how our End-to-End Solutions can help your firm.