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The Accidental Fiduciary: The Unexpected Reach of the New Fiduciary Rule

WBA Compliance Journal
June 2017

On June 9, 2017, after over forty years of “banking” on a simple understanding of the fiduciary rule, the initial phase of the Department of Labor’s (the “DOL”) new and controversial fiduciary rule was implemented. The new rule, applicable to financial service firms that manage retirement assets, expands the scope of who is a fiduciary under the Employee Retirement Income Security Act (“ERISA”), which in turn triggers a number of fiduciary investment advice responsibilities for such individuals. Under the new fiduciary rule, a fiduciary is required to put the client’s best interest first, act in a prudent manner, avoid misleading clients, provide complete disclosures of all relevant information and avoid conflicts of interest.

Although the new fiduciary rule has been in the works since 2010, many financial institutions have been caught off guard by the application of the new rule to their employees and banking operations. In particular, the rule expands the types of situations where communications with customers may be deemed investment advice subject to the rule. Banks must carefully consider how the new rule will impact their operations in order to ensure that communications with customers will not inadvertently trigger the application of the fiduciary rule. In the alternative, financial institutions with trust departments, investment advisory and broker-dealer operations, and other wealth management lines of business will need to develop and execute plans to bring their operations into compliance with the new fiduciary rule.

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