Events & Announcements

Vol. 95 Emerging Scholar Award: Request for Submissions

The Denver Law Review is pleased to announce the 2017 Emerging Scholar Award. This exclusive publication opportunity is open to all scholars who (1) have received their J.D. as of March 1, 2017, (2) have not yet accepted a tenure-track teaching position, and (3) have not held a full-time teaching position for more than three years.

The selected recipient will receive an award of $500, and the Denver Law Review will publish the winning entry in Issue 1, Volume 95, scheduled for early 2018.

Click here for more information.


2017 Symposium – Justice Reinvestment: The Solution to Mass Incarceration?

Feb. 2 & 3, 2017 - Justice Reinvestment: The Solution to Mass Incarceration? The Denver Law Review presents its annual symposium on whether justice reinvestment initiatives are effective tools to end mass incarceration.

Registration is now open. Pending up to 14 CLEs.


Denver Law Review Announces 2016 Emerging Scholar Award Winner

The Denver Law Review is pleased to announce that it has selected Adam Feldman, a Ph.D. student at the University of Southern California, for the 2016 Emerging Scholar Award.

Click here for more information.


DLR Online Proudly Presents a Special Issue, Navigating the Nuance: Pressing Issues in M&A Law and Practice

DLR Online's new special issue, Navigating the Nuance: Pressing Issues in M&A Law and Practice, features eleven student articles covering recent topics in mergers and acquisitions. This is the first collaboration between the Denver Law Review, DLR Online, and Professor Michael R. Siebecker. 
 
Prior special issues from the DLR Online can be found here.

DLR Online Proudly Presents a Special Issue: The Shareholder Proposal Rule and the SEC

DLR Online's new special issue, The Shareholder Proposal Rule and the SEC, features eleven student articles covering Rule 14a-8, the epicenter of the shareholder rights movement. The issue represents the continued collaboration between the Denver Law Review, DLR Online, and Professor J. Robert Brown, Jr. 
 
Explore a thoughtful introduction to the issue by Professor Brown. Prior special issues from the DLR Online can be found here.

DLR Online Proudly Presents a Special Issue 

Taking it to the Next Level: Your Course, Your Program, Your Career

DLR Online's new special issue, Taking it to the Next Level: Your Course, Your Program, Your Career, features three articles by legal writing Professors who share their experiences in the classroom.

 


Vol. 94 Emerging Scholar Award: Request for Submissions

The Denver Law Review is pleased to announce the 2016 Emerging Scholar Award. This exclusive publication opportunity is open to all scholars who (1) have received their J.D. as of March 1, 2016, (2) have not yet accepted a tenure-track teaching position, and (3) have not held a full-time teaching position for more than three years.

The selected recipient will receive an award of $500, and the Denver Law Review will publish the winning entry in Issue 1, Volume 94, scheduled for early 2017.

Click here for more information.


We've Changed Our Name!

The Denver University Law Review is now the Denver Law Review, and the DULR Online is now DLR Online.


Volume 93 Staff Announced

The Denver Law Review is excited to announce the Volume 93 Staff. Please join us in congratulating them in this accomplishment and supporting them in continuing the fine tradition of the Denver Law Review. Please click here to view the masthead.

Please click here to view the photo masthead.


Denver Law Review Announces Emerging Scholar Award

The Denver Law Review is pleased to announce that it has selected Kate Sablosky Elengold, Practitioner-in-Residence at American University's Washington College of Law, for the Emerging Scholar Award of Volume 93.

Click here for more information!


 

Subscriptions and Submissions

For information on how to subscribe to the Denver Law Review, please click here.

For the guidelines on how to submit an article to the Denver Law Review, please click here.

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Wednesday
Mar222017

Department of Labor Fiduciary Rule – Expansion of Fiduciary Duties

[PDF]

Paul L. Vorndran[†]

The U.S. Department of Labor (DOL) has expanded the “investment advice fiduciary” definition under the Employee Retirement Income Security Act of 1974.[1] On April 6, 2016, the DOL issued its final rule (Fiduciary Rule) imposing fiduciary duties upon those who provide investment advice for compensation—direct or indirect—as to the purchase or sale of securities or other investments within a plan or individual retirement account qualified under the Employee Retirement Income Security Act of 1974.[2] According to the Executive Summary, the Fiduciary Rule “aims to require advisers and their firms to give advice that is in the best interest of their customers, without prohibiting common compensation arrangements under conditions designed to ensure the adviser is acting in accordance with fiduciary norms and basic standards of fair dealing.”[3] Further, according to the Executive Summary, the DOL concluded (after a multi-year study that began in 2009) that IRA holders receiving conflicted investment advice may see their investments underperform by an average of 0.5 to 1% per year.[4] This could result in a cost to IRA investors between $95 billion and $189 billion over the next 10 years in the mutual fund segment alone.[5]

Prior to the adoption of the Fiduciary Rule, many advisers of tax qualified accounts included insurance companies and their producers and broker-dealers and their sales representatives. These advisers of tax qualified accounts have not traditionally owed fiduciary duties to those they advise or to those they sell securities and investments. Before the Fiduciary Rule, only registered investment advisers acting pursuant to the Investment Advisors Act of 1940 and registered with the U.S. Securities and Exchange Commission or licensed with state securities commissions owed fiduciary duties to their customers as a matter of law.[6] Upon the effective date of the Fiduciary Rule, April 10, 2017, broker-dealers and insurance companies will owe fiduciary duties to their customers in connection with the sale of investment products in tax qualified accounts.

The DOL’s adoption of the Fiduciary Rule was unquestionably controversial. During the comment period following the DOL’s release of the proposed Fiduciary Rule in early 2015, Commissioner Daniel M. Gallagher of the U.S. Securities and Exchange Commission issued a scathing comment letter to DOL Secretary Thomas E. Perez.[7] Commissioner Gallagher predicted that broker-dealers utilizing a commission-based fee structure would find it so difficult to comply with the “labyrinth of prohibitions and exemptions” of the Fiduciary Rule that they would no longer continue to service lower-valued accounts.[8] According to Commissioner Gallagher, this is bad government policy, will affirmatively harm those it claims to help, and proves the “nanny-state is alive and well.” [9]

Now that the fiduciary standards will apply to all types of advisers when providing recommendations concerning tax qualified accounts, current methods of compensation for insurance producers and broker-dealers will be prohibited if they are not in the best interest of the investor. Generally, fiduciaries are prohibited from receiving compensation from third parties in connection with transactions involving the plans and IRAs.[10] For example, the sale of variable annuities and indexed annuities into a qualified account would not be permitted as these types of investments provide the seller with compensation from the insurance company.[11] However, the Fiduciary Rule provides an exemption to conflicting payment structures or “prohibited transactions” that allows the fiduciary to continue to provide advice and make otherwise prohibited sales. The exemption is known as the Best Interest Contract Exemption (BICE).

In order to satisfy BICE, the fiduciary must agree to provide investment advice that is in the best interest of the investor, acknowledge its fiduciary status, receive only reasonable compensation, disclose all potential conflicts of interest, and provide a detailed breakdown of his collected commission.[12] As reflected in many commentaries, the meaning of these requirements for the exemption, and what constitutes actual compliance, is not altogether clear.

The additional compliance obligations will certainly come at a cost. Some fiduciaries may elect to eliminate small investors as the cost to comply might be too great as suggested by Commissioner Gallagher. It remains to be seen what fallout the Fiduciary Rule will have on both the industry and investors. What is clear is that investment professionals and their lawyers and advisers will spend substantial time and money sorting out this new overlay of law governing retirement plans and IRAs.

 


[†] Paul L. Vorndran is a member of the law firm Vorndran Shilliday, P.C. in Denver, Colorado. He received his Juris Doctor degree from the University of Colorado School of Law in 1992. He has practiced law for more than 20 years primarily in the areas of securities litigation and regulation.

[1] 29 C.F.R. § 2510.3-21 (1974).

[2] Id.

[3] Id.

[4] Id.

[5] Id.

[6] 15 U.S.C. § 80b-1–80b-21; 3 C.C.R. 704-1:51-4.8-IA.

[7] Letter from Daniel M. Gallagher, Comm’r, Sec. & Exch. Comm’n, to Thomas E. Perez, Sec’y, Dep’t of Labor (July 21, 2015), https://www.sec.gov/news/speech/2015/gallagher-dol-comment-ttr-7-21-15.pdf.

[8] Id.

[9] Id.

[10] Best Interest Contract Exemption; Correction, 81 Fed. Reg. 44773, 44775 (July 11, 2016) (to be codified at 29 C.F.R. pt. 2550).

[11] Id.

[12] Id.