“Getting Your ‘Arms’ Around DOL’s Fiduciary Proposal if You’re Not an Octopus”

There are many complexities associated with the Department of Labor’s (‘‘Department’’ or ‘‘DOL’’) proposal (RIN 1210-AB32) (the ‘‘Proposal’’) to expand the definition of investment advice fiduciary as it applies to providers of services to (1) employee benefit plans subject to the Employee Retirement Income Security Act of 1974, as amended (‘‘ERISA’’), and (2) individual retirement accounts (‘‘IRAs’’) subject to the Internal Revenue Code of 1986, as amended (the ‘‘Code’’) (collectively ‘‘Plans’’). Yet despite the many attempts to address some of these complexities—myriad press reports and law firm and consulting firm client alerts, approximately 2,600 written comments on the Proposal (which may be viewed on the Department’s website and in the Bloomberg BNA chart at 146 PBD, 7/30/15 , and which total does not include the many additional comments on the exemptions proposed by the Department concurrently with the proposed changes to the definition of fiduciary), and the significant amount of testimony given at hearings called by the Department in August—it can be difficult to get one’s arms around the potential legal and commercial impacts of such a ground-breaking and market-changing proposal.

Unless, perhaps you are an octopus, with lots of ink. If a picture can be worth 1,000 (or more) words, the attached detailed flow-chart may help shed some light, in a single page, on the architecture of the Proposal and certain of its key elements, such as the Best Interest Contract Exemption (‘‘BIC’’ or ‘‘BICE’’) and the Principal Transaction Exemption.