The Department of Labor (DOL) has released the first round of frequently asked questions relating to its fiduciary rule, the first phase of which is effective in April. CUNA expects the DOL to release additional FAQs over the next few months.
The rule, finalized in April, defines who is a “fiduciary” of an employee benefit plan, adding brokers and advisers providing advice to individual retirement accounts.
CUNA filed a comment letter and follow-up comment letter outlining potential negative impact for credit unions. Several of those questions were addressed, and the DOL provided some clarifications about what activities are considered “education” and “advice.”
FAQ question 20 of the rule addresses relationships for banks with affiliates and non-affiliates. This seems applicable to credit unions who have relationships with credit union service organizations (CUSOs) that provide financial investment services. It appears to provide guidance about whether providing marketing materials can cause fiduciary status.
The FAQ states, “Under the Rule, a recommendation of other persons to provide investment advice or investment management services constitutes fiduciary investment advice, and receipt of compensation as a result of such advice is a prohibited transaction requiring compliance with an exemption. In contrast, marketing oneself or an affiliate (when it is disclosed as such), without otherwise making an investment recommendation covered by the Rule, does not constitute investment advice that may result in a prohibited transaction. Referrals to affiliates who are providers of retail non-deposit investment products therefore generally would not be considered fiduciary investment advice giving rise to a prohibited transaction for which an exemption is required.”
For a deeper look into the details of the document, see CUNA’s Removing Barriers Blog.