ERISA expert Fred Reish notes that the DOL recently levied a $1.266 million fine on an adviser providing fiduciary advice for a fee that also received 12b-1 fees from the mutual funds they recommended, claiming it was a prohibited transaction.
The DOL, which is starting to get a better understanding of fees paid to broker dealers and RIAs, also claimed that by taking undisclosed compensation, the advisor is setting its own compensation, becoming a de facto fiduciary and using that status for its own benefit. (The same issue was raised in a recent post by attorneys from Groom Law Group about ING’s fine for keeping gains from transactional errors.)
Additional compensation received by an advisor’s broker dealer or RIA on account of work done by that advisor may well become a hot button issue for the DOL, especially as more advisors become fiduciaries under the agency’s proposed regs. Clearly, advisors need to ensure that their compensation is level.
