It was reported in January 2015 that the Department of Labor (DOL) will abandon the “appraiser-as-fiduciary” rule from its planned re-proposal of a broad set of rules affecting fiduciaries and prohibited transactions.
This story goes back to 2010 when the DOL issued a proposed regulation that would impose a fiduciary obligation on business appraisers in the valuation of Employee Stock Ownership Plans (ESOPs). The DOL withdrew its proposal in September 2011, announcing that a new version of the regulation would be forthcoming. Nothing has really happened in the last three years until this latest development, one that is viewed favorably by the business valuation community.
Business appraisers and organizations such as the American Society of Appraisers (ASA) and the American Institute of Certified Public Accountants (AICPA) have strongly opposed this type of regulation. Some of the reasons for opposition include:
- The need for appraisers to purchase fiduciary liability insurance which would drive up appraisal costs;
- higher costs could force out smaller appraiser firms and sole practitioners;
- appraisal firms may not want to take on the additional risk and avoid ESOP valuations altogether; and
- higher costs would be passed on to the ESOP plans which could discourage the creation of new ones in the future.
By Cindy Andresen, ASA
The ESOP Association
BVWire Issue #149-1