Author: Liz Skinner
May 24, 2016
New regulation has broad reach, so when in doubt, use the best interest contract exemption, assistant secretary says
DOL fiduciary champion Phyllis Borzi said her agency will help work through specifics that aren’t covered in the new rule requiring retirement advice to be delivered in a client’s best interest. But firms with questions about particular sales practices that aren’t mentioned in the principles-based regulation should probably err on the side of caution, she said.
“This is a broad rule. It’s intended to sweep broadly,” she told those attending an event in Philadelphia hosted by the Institute for the Fiduciary Standard on Tuesday. “When in doubt, assume that you’re supposed to be under the best interest contract exemption.”
The DOL regulation requires advisers to pledge to act in the best interest of clients when discussing retirement assets such as 401(k)s or individual retirement accounts. It mandates that clients sign a best interest contract exemption if advisers are going to be compensated with commissions on certain products and in other situations.
Assistant Labor Secretary Borzi, largely considered the architect of the rule that was six years in the making, said any exemption to the rule is going to be construed “extraordinarily narrowly.”