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Safe Harbors and Exclusions in the DOL's Fiduciary Rule

Some guidelines for determining when a communication qualifies as investment advice. 

W. Scott Simon, 02/02/2017

We continue to take a deep dive into the Conflict of Interest Rule (Rule) promulgated by the U.S. Department of Labor on April 8, 2016.

Last month’s column concluded with a framework to determine if an advisor is subject to the Rule. This month’s column takes a closer look at the safe harbor exceptions/exclusions.

Some communications are not deemed by the Rule to be a “recommendation,” so they’re not “investment advice.”

These communications include (1) marketing or making available a platform, (2) general communications and (3) investment education. Let’s take a look at each.

Marketing or Making Available a Platform

A “person,” defined under the Rule as including a plan record-keeper, may market to a plan fiduciary its platform or make investment options available through its platform without being considered making a recommendation as long as:

• The person is independent of the plan fiduciary;
• The person provides written disclosure that it’s not providing impartial investment advice or fiduciary advice; and
• The plan’s individualized needs, its participants, or beneficiaries are not discussed.

However, the person is allowed to:

W. Scott Simon is an expert on the Uniform Prudent Investor Act and the Restatement 3rd of Trusts (Prudent Investor Rule). He is the author of two books, one of which, The Prudent Investor Act: A Guide to Understandingis the definitive work on modern prudent fiduciary investing.

Simon provides services as a consultant and expert witness on fiduciary issues in litigation and arbitrations. He is a member of the State Bar of California, a Certified Financial Planner, and an Accredited Investment Fiduciary Analyst. Simon's certification as an AIFA qualifies him to conduct independent fiduciary reviews for those concerned about their responsibilities investing the assets of endowments and foundations, ERISA retirement plans, private family trusts, public employee retirement plans as well as high net worth individuals.

For more information about Simon, please visitPrudent Investor Advisors, or you can e-mail him at wssimon@prudentllc.com

The author is not an employee of Morningstar, Inc. The views expressed in this article are the author's. They do not necessarily reflect the views of Morningstar.

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