On June 21, 2018, the US Court of Appeals for the Fifth Circuit issued an opinion narrowing the applicability of the Employee Retirement Income Security Act of 1974 ("ERISA"), which imposes a heightened fiduciary obligation on financial advisers to clients investing pension money as opposed to non-pension funds.
The Court vacated the 2016 Fiduciary Rule, which triggered this obligation whenever financial advice was (1) provided to an ERISA investor and (2) such advice was tailored to the needs of the investor's ERISA plan. Now, the old ERISA rule applies, whereby, in addition to the above 2 prongs, a heightened responsibility is triggered only when such advice is also (3) provided on a regular basis, (4) pursuant to a mutual arrangement and (5) is the primary basis for the investor's investment decisions. As a result, advisers can market directly to ERISA investors and should update their disclosure documents.
For more information see here.
This article was written with contributions from Nabeela Latif.
