Ensuring Compliance: The 2023 DOL Retrospective Review

The Department of Labor (“DOL”) continues to require the completion of a Retrospective Review. The Retrospective Review (the “Review”) requirement of Prohibited Transaction Exemption 2020-02 (the “PTE”) is designed to assist in detecting and preventing violations of, and achieving compliance with, the Impartial Conduct Standards and the policies and procedures adopted for compliance with the PTE. Compliance with the standards of the PTE is achieved by:

1. providing investment advice that is in the retirement investor’s best interest,
2. charging reasonable compensation,
3. avoiding materially misleading statements about the recommended investment transaction and other relevant matters,
4. seeking to obtain the best execution of the investment transaction reasonably available under the circumstances, as required by the federal securities laws, and
5. self-correcting any violation within 90 days and furnishing notification to the DOL within thirty days of the correction.

The retrospective review, report and certification must be completed at least annually and no later than six months following the end of the period covered by the review. A review covering calendar year 2023 must be completed by or before July 1, 2024. The investment adviser must retain the report, certification and supporting data for six years.

Remember that the methodology and results of the retrospective review must be reduced to a written report. The written report must:

• describe the policies and procedures in place at the investment adviser which ensure compliance with the requirements of the Impartial Conduct Standards, violations of the investment adviser’s compliance policies and procedures during the review period;
• describe violations of the investment adviser’s compliance policies and procedures during the review period, including a description of the issue, how the issue was detected, and how the issue was remediated;
• whether any self-corrections were required; and
• how the policies and procedures were modified, if at all.

The written report should be provided to one of the investment adviser’s Senior Executive Officers, who must then make certain certifications related to their review of the report.

Violations of the PTE’s conditions can be self-corrected when conducting the retrospective review.