ERISA Fiduciary Duties

Due to the significant restrictions and responsibilities ERISA regulations place on the financial advisor, branch manager and the financial institution concerned. Usually the financial company will have a policy prohibits any financial advisors from taking discretionary control or otherwise assuming fiduciary responsibility with respect to employee benefit plan, IRA, SEP IRA, or Keogh assets without the written approval of the branch manager, regional director, national sales director and director of compliance.

Under ERISA, without formally assuming the role of fiduciary, taking discretion or exercising control, a financial advisor (and his/her financial firm) may, by their actions, become an ERISA fiduciary with respect to a 401k or retirement plan. A financial advisor (and his/her financial firm.) becomes a fiduciary by:

• being deemed to exercise control by providing the sole source or the principal source of information relied upon by the client for investment decisions.
• having discretion to select the type of security, the amount, the timing or the price at which securities will be purchased.
• crossing the line from salesmanship to providing "investment advice for a fee," as defined by ERISA. Providing "investment advice for a fee" when (on a regular basis) the plan is given individualized investment advice based on the particular needs of the plan, under a mutual agreement or understanding that such advice will serve as a primary basis for investment decisions by the plan. The commissions or account fees received from the plan are treated as the "fee" for such investment advice. The "mutual agreement or understanding" may be written, oral, implied or arise in the course of a business relationship.
  The key element in the client-broker relationship which determines if the financial advisor is an ERISA fiduciary is control over investment decisions.