The Potential Effect of the Department of Labor’s New Fiduciary Rule on Broker-Dealers and the Middle Income Retirement Investors Who Rely on Them

Authors

Nadia Yoon

Abstract

On April 6, 2016, the U.S. Department of Labor issued a final rule aimed at increasing the reach of the definition of fiduciary status under the Employee Retirement Income Security Act of 1974 (ERISA). This rule closed a loophole that had allowed broker-dealers to avoid becoming investment advisers under ERISA, allowing them to provide bad advice to their retirement clients without disclosing material conflicts of interest. This note begins by laying out the fiduciary rules and standards under ERISA and the U.S. Securities and Exchange Commission’s oversight regime before the final rule. It then lays out the relevant details of the rule and its Best Interest Contract Exemption. Next, it analyzes how the rule has changed the fiduciary standards for broker-dealers. Finally, it concludes by exploring the potential impact the final rule may have for middle-income investors and some criticisms the Department of Labor received during the rule’s open comment period.

Recommended Citation

Nadia Yoon, The Potential Effect of the Department of Labor’s New Fiduciary Rule on Broker-Dealers and the Middle Income Retirement Investors Who Rely on Them, 66 Cath. U. L. Rev. 223 (2017).
Available at: https://scholarship.law.edu/lawreview/vol66/iss1/11