Exemption for Pre-Existing Transactions
(Limited Grandfathering)
This exemption permits the continued receipt of compensation
for the continuation of a systematic purchase
program established before April 10, 2017.
This exemption permits the continued receipt of compensation
for a recommendation to hold an investment
that was established before April 10, 2017.
The DOL’s goal for this exemption is to assure financial
institutions and advisers that they may continue to
receive the compensation agreed to be paid before
April 10, 2017 for continuation of the investment transactions
occurring prior to April 10, 2017.
This exemption has the following conditions.
-
The compensation being paid is due to an an
agreement or understanding that was created prior
to April 10, 2017, and such agreement or understanding
has not expired or come up for renewal
after April 10, 2017.
- The prior investment transaction was not otherwise
a non-exempt prohibited transaction on the date it
occurred.
- The compensation is not received on account of
additional amounts contributed to the previously
acquired investments. It is permissible to exchange
funds within a mutual fund company or variable
annuity contract pursuant to an exchange feature
or a rebalancing provision as long as it was established
prior to April 10, 2017 and as long as the
financial institution and adviser do not receive
increased compensation either as a fixed dollar
amount or as a percentage of assets than they were
entitled to receive prior to April 10, 2017.
- The amount of compensation paid to the financial
institution, adviser or any affiliate on account of the
transaction is reasonable.
- Any investment recommendations made after April
10, 2017, by the financial institution or an adviser
must reflect the care, skill, prudence and diligence
that prudent person acting in a like capacity and
familiar with such matters would use in the conduct
of an enterprise of like character and with like
aims, based on the investment objectives, risk tolerance,
financial circumstances and need of the
IRA owner or the retirement investor and are made
with no consideration of the needs or interests of
the financial institution or its advisers.
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