Compliance Center: DOL Releases Final Fiduciary Rule Amendments

Covered investment advice is defined as a “recommendation” to a plan, plan fiduciary, plan participant and beneficiary and IRA owner for a fee or other compensation, direct or indirect:

  • Recommendations as to the advisability of buying, selling, or holding investments;
  • Recommendations as to the advisability of taking a distributions of assets from a plan, and the investment of those distributed assets;
  • Recommendations as to the management of investments, including management of assets to be distributed from a plan or IRA; and
  • Recommendations of a person who will receive a fee for any of the functions described above.

The types of relationships that must exist for such recommendations to give rise to fiduciary investment advice responsibilities include recommendations made either directly or indirectly (e.g. through or together with any affiliate) by a person who:

  • Represents or acknowledges that they are acting as a fiduciary within the meaning of ERISA or the IRC;
  • Renders advice pursuant to a written or verbal agreement, arrangement or understanding that the advice is based on the particular investment needs of the advice recipient; or
  • Directs the advice to a specific recipient or recipients regarding the advisability of a particular investment or management decision with respect to securities or other investment property of the plan or IRA.

The recommendation must be provided in exchange for a “fee or other compensation.”  

This means a person is a fiduciary if they receive compensation for providing investment advice based on the particular needs of the individual being advised, or if he or she directs that person to a specific plan sponsor, plan participant, or IRA owner. A fiduciary can be a broker, registered investment advisor, or other type of advisor.

Under ERISA and the IRC, individuals providing fiduciary investment advice to plan sponsors, plan participants, and IRA owners are not permitted to receive payments creating conflicts of interest without a “ prohibited transaction exemption”  (PTE). That’s where the “Best Interest Contract Exemption” comes in—one of Department of Labor’s newly-created PTEs (which some refer to as the BIC or BICE). 

The exemption allows investment advisors to continue to use certain compensation arrangements that might otherwise be forbidden so long as they, among other things, “commit to putting their client’s best interest first,”  adopt anti-conflict policies and procedures (including avoiding certain incentive practices), and disclose any conflicts of interest that could affect their best judgment as a fiduciary rendering advice.

Compliance with the new requirements will not be required until one year after the final rule is published in the Federal Register—April 2017. Exemptions will be phased in, with full compliance required by January 1, 2018.

The NWCUA is currently reviewing the Final Rule and will issue a Compliance Bulletin to help credit unions understand what it means to them, while also creating a RIPT toolkit to assist credit unions with implementation of necessary changes.

Compliance Question of the Week

Under ESIGN, What is an e-signature?

An “e-signature” is simply an electronic sound, symbol, or process, attached to or associated with a contract or other record that was executed by a person with the intent to sign the record. An electronic record is a contract or other record created, generated, sent, communicated, received, or stored by electronic means. Other than providing these broad definitions, ESIGN does not specify any technical requirements for e-signatures or records. This means that credit unions can utilize any number of different technologies to facilitate “e-contracts” with their members.

Today, such technologies include, but are not limited to:

  • Digital signatures which link a person’s identity to an encrypted private key issued only to that individual (“public key infrastructure” or PKI);
  • Biometrics which uses a person’s unique physical characteristics (such as face, voice and/or fingerprints) for authentication purposes; or
  • Smart cards, credit card-sized plastic cards with an embedded computer chip.


Electronic Signatures in Global National Commerce Act

Legal Briefs

National Credit Union Administration (NCUA)

The NCUA announced that it will hold a webinar on Wednesday, April 27 titled “Hot Topics in Compliance.” Credit unions can register here.

Consumer Financial Protection Bureau (CFPB)

CFPB Director Richard Cordray delivered written testimony to the Senate Committee on Banking, Housing, and Urban Affairs. The testimony included the items the tasks that the Dodd-Frank Act charged the Bureau with along with the actions the CFPB has taken to help consumers.

The CFPB issued a reminder for its Community Bank Advisory Council meeting on April 21, 2016.

The CFPB published its Notice of Expiration of Suspension regarding Credit Card Agreement Submission required per Regulation Z in the Federal Register.

Federal Reserve Board (FRB)

The FRB released this month’s issue of FedFocus.

The FRB released the meeting minutes from its most recent Federal Open Market Committee meeting held on March 15 and 16, 2016.

Federal Trade Commission (FTC)

The FTC announced the date of its next PrivacyCon, which will be held in Washington D.C. on January 12, 2017.   

Federal Deposit Insurance Corporation (FDIC)

The FDIC released its list of banks examined for CRA compliance in March 2016.  

The FDIC released its most recent Supervisory Highlights, which is a Special Corporate Governance Edition.

The FDIC released its agenda for its Advisory Committee on Community Banking meeting.

Office of the Comptroller of the Currency (OCC)

The OCC released its most recent CRA Evaluations for March 2016.

United States Department of Labor (DOL)

The DOL issued its Conflict of Interest Final Rule. In addition to the final rule, the DOL also released a webpage aimed at helping entities comply with the rule.

Office of Foreign Assets Control (OFAC)

OFAC has updated the SDN list as of April 5, 2016. The last update prior to this was April 4, 2016.

Questions? Contact the Compliance Hotline: 1.800.546.4465,

Posted in Compliance News, Federal.