Erisa

ERISA and Client Investment Recommendations ERISA concepts appear directly in Section III of the Series 65 exam and test whether you understand the elevated duties owed to retirement plan clients — an area where the fiduciary standard is not just an ethical guideline but a federal legal requirement. --- ## What Is ERISA and Why Does It Matter? ERISA (the Employee Retirement Income Security Act) is the federal law governing employer-sponsored retirement plans such as 401(k), 403(b), and pension plans. When an investment adviser works with these plans — or with participants in them — they are subject to strict fiduciary obligations that go beyond the ordinary advisory relationship. For the Series 65, the key ERISA concepts you must master are: - The prudent expert standard - The four core ERISA fiduciary duties - Prohibited transactions --- ## The Prudent Expert Standard The original common-law concept was the prudent man standard — a fiduciary should act as a "prudent man" would with someone else's money. ERISA upgraded this to the prudent expert standard (sometimes called the *prudent investor* standard in this context). Under this higher bar, a fiduciary must act with the care, skill, prudence, and diligence that a knowledgeable expert familiar with such matters would use. This is critical: ignorance is not a defense. If you are serving as an ERISA fiduciary, you are held to the standard of someone who *is* an expert, not simply someone who *tries their best*. > Worked Example: An investment adviser representative manages assets for a corporate 401(k) plan. She recommends concentrating 80% of plan assets in a single speculative biotech stock because she personally believes in it. Even if she genuinely…