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Practice Management

Conditions for the Prohibited Transaction Exemption

Q. On Dec. 18, 2020, the DOL released Prohibited Transaction Exemption (PTE) 2020-02, “Improving Investment Advice for Workers & Retirees.” It reinterpreted and broadened the five-part test under DOL’s 1975 regulation defining who an advice fiduciary is. What are the conditions for this exemption?

A. Conditions for the new class exemption include: 

  • follow impartial conduct standards;
  • acknowledge fiduciary status; 
  • describe services and disclose material conflicts in advance; 
  • develop written policies and procedures to comply with these standards and mitigate conflicts; 
  • conduct annual retrospective compliance review; and 
  • document rollover advice.