<nobr>Mar 3, 2010</nobr>

DOL Releases Re-Proposed Investment Advice Regulations

The Department of Labor (DOL) has released re-proposed regulations on investment advice provided to participants and beneficiaries in individual account plans, including 401(k) plans. These proposed regulations replace the previously released final rule on investment advice that was withdrawn on November 20, 2009.

The most recent proposed regulations on investment advice do not retain the class exemption contained in the January 2009 final regulations. The DOL stated in the preamble of the recent regulations that comments received regarding the final regulations and class exemption's conditions raised significant doubt regarding the previous regulation's conditions and the ability of those conditions to mitigate self-dealing.

Highlights of the proposed regulation are as follows:

• Investment advice may be provided under the statutory exemption in two ways: (1) through the use of a computer model certified as unbiased; or (2) through an investment adviser who is compensated on a "level-fee" basis (fees do not vary based on investments that the participant/beneficiary selects);


• Plan fiduciaries selects the computer model or fee leveling investment arrangement (independent of the investment adviser and or its affiliates);


• Investment advisers have certain recordkeeping requirements in order to rely on the exemption for the computer model or fee leveling advice arrangements;


• Independent advisers must certify computer models as unbiased and as meeting the exemption's requirements;


• Independent advisers who certify computer models must satisfy the regulation's qualification requirements;


• Fee-leveling arrangements do not permit investment advisers (including its employees) to receive compensation from affiliates on the basis of their recommendations;


• Investment advice arrangements must undergo an annual audit (the auditor must be independent from the investment advice provider);


• Advisers must disclose certain information to participants.

Comments on the proposed regulations are due by May 5, 2010.

Questions or comments on this issue should be addressed to Kathryn Ricard (kricard@eric.org).

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Proposed Rule on Investment Advice

DOL Fact Sheet

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