The Department of Labor has published a proposed rule that would amend the definition of “fiduciary” and would significantly expand the categories of persons who would be deemed to be fiduciaries subject to the Employee Retirement Income Security Act of 1974 (“ERISA”).
Currently, ERISA defines the term “fiduciary” to include any person who “renders investment advice for a fee or other compensation” with respect to a plan. Providing “investment advice” requires that a person: (1) render advice as to the value of securities or other property or the advisability of investing in securities or other property, (2) that is provided on a regular basis, (3) pursuant to a mutual understanding, (4) that the advice will serve as a primary basis for investment decisions, and (5) that the advice will be based on the individualized needs of the plan.
The proposed rule would eliminate the requirement under the current rule that the advice is provided on a “regular basis.” Therefore, under the proposed rule a person who provides advice on a particular investment on a one-time basis may be considered a fiduciary. Moreover, the current requirement that the parties understand that the advice will serve as a “primary basis” for investment decisions would no longer apply under the proposed rule. Accordingly, the fact that the understanding of the parties is that the advice may be considered in connection with making a decision relating to plan assets is sufficient to impose fiduciary status.
For more information regarding registration or complying with the proposed definition of “fiduciary”, please contact us at (619) 278-0020. The full text of the proposed definition can be found here: http://webapps.dol.gov/FederalRegister/PdfDisplay.aspx?DocId=24328