Industry interests are anxious to see what products the Department of Labor will restrict from IRAs in its final fiduciary rule.

A broad swath of products sold by commissioned brokers didn’t make the DOL’s so-called “approved list” in the latest version of the proposed rule.

Banned products include direct-participation programs, private securities (including hedge funds), options, over-the-counter stocks, futures, foreign securities and currencies and structured products.

Bank of America Merrill Lynch says brokered CDs, preferred stocks and new issues of equity and debt also won’t be allowed because a proposed DOL exemption for principle trading doesn’t include these assets. 

Variable annuities made the list, but sales could be impacted if compensation to the advisor and firm were judged to be unreasonably high.

The product restrictions are incorporated into a proposed exemption for commissioned brokers, known as the Best Interests Contract Exemption (BICE).

The BICE applies to investments recommended by brokers who would be fiduciaries under the plan whenever they recommend products to IRA owners. Such investments would otherwise be prohibited transactions under the proposal.

Fee-based advisors whose compensation doesn’t vary by the products they recommend would generally not be impacted by the proposal and could continue to recommend a wider variety of investments. 

The DOL’s approved list would restrict IRA investments to liquid and transparent products, including U.S.-listed stocks, many bonds, mutual funds, ETFs, variable annuities, bank accounts and CDs.

“Limiting the exemption in this manner ensures that the investments needed to build a basic diversified portfolio are available,” the DOL’s proposal said, “while limiting the exemption to those investments that are relatively transparent and liquid.” 

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