The U.S. Department of Labor (DOL) has finalized its new prohibited transaction exemption (PTE) for financial professionals who provide retirement plan advice. The PTE requires advisors to work in the best interests of their clients, receive reasonable compensation, and make no “materially misleading statements.” The PTE is effective 60 days after publication in the Federal Register.
The DOL exemption aligns with the Securities and Exchange Commission’s Regulation Best Interest, and preserves opportunities and choices for workers and retirees seeking high-quality, personalized advice.
“NAIFA thinks the Department of Labor proposal – with the modifications in today’s final rule – will benefit retirement investors by preserving access to a wide variety investment advice professionals, products, and compensation arrangements,” said NAIFA CEO Kevin Mayeux. “The Department has struck the right balance between crafting a PTE with robust compliance obligations that serve the interests of investors, while avoiding an overly prescriptive approach or penalizing certain market segments or arrangements versus others.”
The DOL under the Obama administration initially issued a rule that would have imposed a restrictive fiduciary duty on financial professionals and hindered access of middle-market investors to retirement services and advice. NAIFA was among the organizations that filed a lawsuit resulting in the U.S. Court of Appeals for the Fifth Circuit vacating the rule in 2018.