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Some believe that the broad definitions in the proposed DOL rule will cause investment advisors to take a step back from advising their clients to invest in startups, as now they may be held accountable for such advice. If RIA's helped facilitate investments in companies like Facebook and other "unicorns", the new rule may cause advisors to steer clear from such opportunities.
But while Congress and the SEC have recently worked to expand the pool of investors available to startups, the DOL seems determined to radically shrink it. When it comes to the “best interest” mandate of the fiduciary rule, the DOL says through omission that no “accrediteds” need not apply. And “fiduciary” is defined so broadly as to even potentially include custodians and appraisers of self-directed IRAs, who measure value but in no way provide advice. This heightened liability could limit IRA service providers, which could in turn limit investment in startups and Fintech.
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