Faegre Partner Bruce Ashton said one of his clients was issued “what DOL euphemistically calls a voluntary compliance letter” after another, unrelated advisor to the plan was found to have engaged in a prohibited transaction for charging unreasonable fees."
“DOL issued a final letter in which they said that the RIA had breached their fiduciary responsibility by not verifying that fees are unreasonable, which to me was way beyond the scope of what the RIA had agreed to do. Ultimately, we found the RIA did not have to disclose the event and they never had to put money in either,” Ashton said.
Advisors who get an initial document request from a DOL investigator need to be strategic, Ashton said. “There may be a temptation to do a data dump. Do not do that. You need to have someone review files at the very least and see what’s in there. Comply with what is asked for, but don’t provide anything that isn’t asked for,” Ashton said.
“Do not give freebies,” Campbell added. “That’s why it’s often advisable to have one person with whom DOL connects and not have multiple people because it’s an opportunity to lose control of documents.”
As an added protection to ensure an RIA firm retains control, “I think you should also claim FOIA [Freedom of Information Act] assertion over all of your documents, so the DOL has to turn over all requests for your documents to you,” Campbell added.