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CEF Specialist

The Future of CEFs Gets Dimmer With DOL Ruling

The Fiduciary Standard presents another hurdle for CEF IPOs.

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Last month, the Department of Labor released its finalized rules on the Fiduciary Standard. We've discussed what that standard could mean for closed-end funds, particularly the IPO market, previously. This month, we will briefly revisit that discussion under the context of the new rules.

The Fiduciary Standard is the highest standard of care required by investment professionals. Before the DOL's ruling, it applied only to registered investment advisors under the Investment Advisor's Act of 1940. The lines between RIAs and broker/dealers are blurring, however, and regulators (rightly) want increased responsibility on the part of the broker/dealers. The Fiduciary Standard requires advisors (and now broker/dealers under certain circumstances) to put their clients' interests before their own and to eliminate conflicts of interest or disclose any conflicts that cannot be eliminated.

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Jason Kephart does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.