Category: Broker-Dealers


Interesting Angles on the DOL’s Fiduciary Rule #48

Posted on May 25, 2017, by Fred Reish in BICE, Broker-Dealers, DOL Activity, fiduciary, prohibited transaction, prudent. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #48

The Last Word: The Fiduciary Rule Applies on June 9

This is my 48th article about interesting observations concerning the Department of Labor’s fiduciary rule and exemptions. These articles also cover the DOL’s FAQs interpreting the regulation and exemptions and related developments in the securities laws.

The Department of Labor has announced that it will not further delay the application of the fiduciary rule. As a result, the new fiduciary definition and the “transition” exemptions will apply to investment and insurance advice to plans, participants and IRA owners (“Retirement Investors” of “qualified accounts”) on June 9.

When the DOL announced its decision, it also issued additional guidance, in the form of FAQs and a non-enforcement policy.

For the most part, the FAQs were helpful.

For example, they clarify that certain types of information and conversation are educational, rather than fiduciary. However, FAQ #6 appears to have … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #45

Posted on May 2, 2017, by Fred Reish in BICE, Broker-Dealers, DOL Activity, fiduciary, prohibited transaction, Registered Investment Advisers. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #45

The DOL Fiduciary “Package”: Basics on the Prohibited Transaction Exemptions

This is my 45th article about interesting observations concerning the Department of Labor’s fiduciary rule and exemptions. These articles also cover the DOL’s FAQs interpreting the regulation and exemptions and related developments in the securities laws.

My last post (Angles #44) discussed the requirements of ERISA’s prudent man rule and of the best interest standard of care for IRAs and plans. This article outlines the requirements of the two prohibited transaction exemptions that will apply to recommendations of investment products and services and insurance products to plans, participants and IRAs (“qualified accounts”). Those two exemptions are:

Prohibited Transaction Exemption 84-24 (which covers recommendations of insurance products, including annuities and life insurance policies). This “transition” 84-24 has been amended to cover all types of annuities (group and individual, variable, fixed rate and fixed index) … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #44

Posted on April 26, 2017, by Fred Reish in BICE, Broker-Dealers, DOL Activity, fiduciary, prohibited transaction, prudent. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #44

The Basic Structure of the Fiduciary Package (June 9)

This is my 44th article about interesting observations concerning the Department of Labor’s fiduciary rule and exemptions. These articles also cover the DOL’s FAQs interpreting the regulation and exemptions and related developments in the securities laws.

This article focuses on the fiduciary rule; next week I will discuss two of the exemptions, the Best Interest Contract Exemption and 84-24.

As we all know by now, the DOL’s new fiduciary definition applies on June 9. As a result the following recommendations will be fiduciary acts on and after June 9:

Recommendations of investments, investment strategies, insurance and annuities, investment managers, other fiduciaries, distributions and rollovers, and IRA transfers;
Recommendations to ERISA plans, participants or IRA owners.

Fiduciary recommendations to plans and participants (including rollover recommendations) will be subject to ERISA’s prudent man rule and duty of loyalty and, … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #43

Posted on April 19, 2017, by Fred Reish in BICE, Broker-Dealers, DOL Activity, fiduciary, prohibited transaction, Registered Investment Advisers, RIA, SEC. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #43

BICE Transition: More Than the Eye Can See

This is my 43rd article about interesting observations concerning the Department of Labor’s fiduciary rule and exemptions. These articles also cover the DOL’s FAQs interpreting the regulation and exemptions and related developments in the securities laws.

As we all know by now, the new, and greatly expanded, definition of fiduciary advice becomes applicable on June 9. That means that almost any investment or insurance recommendation to a plan, participant, or IRA will be a fiduciary act. (The definition of investment recommendations is also very broad, including referrals to investment managers, recommendations to take distributions from plans, and recommendations to transfer IRAs.)

As a result, investment and insurance recommendations to participants and plans must be prudently developed and must be loyal to the plan or participant. But, recommendations to IRAs will not be subject to the … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #42

Posted on April 13, 2017, by Fred Reish in Broker-Dealers, DOL Activity, fiduciary, prudent, Registered Investment Advisers, RIA, Uncategorized. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #42

Rollovers under the DOL’s Final Rule

This is my 42nd article about interesting observations concerning the Department of Labor’s fiduciary rule and exemptions. These articles also cover the DOL’s FAQs interpreting the regulation and exemptions and related developments in the securities laws.

On April 7, 2017 the DOL issued its final regulation on the extension of the applicability date for the fiduciary definition and the related exemptions. This article discusses the impact of those changes on fiduciary status for recommendations to plan participants to take distributions and roll over to IRAs.

In its guidance, the DOL extended the applicability date of the new fiduciary definition from April 10 to June 9, but did not otherwise modify the definition. Since the fiduciary rule defined a recommendation to take a plan distribution as fiduciary advice, any recommendation to take a distribution and rollover to an … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #38

Posted on March 1, 2017, by Fred Reish in Broker-Dealers, DOL Activity, Registered Investment Advisers, RIA, SEC. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #38

SEC Examinations of RIAs and Broker-Dealers under the ReTIRE Initiative

This is my 38th article about interesting observations concerning the Department of Labor’s fiduciary rule and exemptions. These articles also cover the DOL’s FAQs interpreting the regulation and exemptions.

As explained in my last post (Angles #37), the SEC’s Office of Compliance Inspections and Examinations (OCIE) issued a National Exam Program Risk Alert concerning examinations about services offered by RIAs and broker-dealers to investors with retirement accounts. One of the areas specifically identified for those examinations is “Reasonable Basis for Recommendations.” The OCIE described that issue as:

“Registrants have important obligations under the federal securities laws and SRO rules (with respect to broker-dealers) when making recommendations or providing investment advice. To the extent applicable and required, the staff will assess the actions of registrants and their representatives for consistency with these … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #31

Posted on December 22, 2016, by Fred Reish in BICE, Broker-Dealers, DOL Activity, fiduciary, prohibited transaction, prudent. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #31

“Un-levelizing” Level Fee Fiduciaries

This is my 31st article about interesting observations concerning the Department of Labor’s fiduciary rule and exemptions. These articles also cover the DOL’s FAQs interpreting the regulation and exemptions.

In the last article I posted, I discussed the three meanings of “Level Fee Fiduciary.” This article discusses the kinds of payments or benefits that will “un-levelize” a Level Fee Fiduciary.

As a starting point, the definition of compensation, for these purposes, includes any money or things of monetary value. So, it covers both cash and non-cash amounts. However, as the DOL explains, it must be directly or indirectly connected to a recommendation:

The term ‘‘fee or other compensation, direct or indirect’’ means . . . any explicit fee or compensation for the advice received by the person (or by an affiliate) from any source, and any other fee … Read More »


The Presidential Election: Now What?

Posted on November 29, 2016, by Fred Reish in BICE, Broker-Dealers, DOL Activity, fiduciary, Registered Investment Advisers, RIA. Comments Off on The Presidential Election: Now What?

One of the consequences of the presidential election is that the future of the fiduciary rule (and the exemptions) is uncertain. What does that mean to advisers . . . regardless of whether they are representatives of RIAs or broker-dealers, or for that matter, if they are independent insurance agents?

The answer is that nobody knows. However, this article outlines the most likely alternatives. Those are:

The rule will be killed by regulation or legislation.
The rule will be implemented “as is.”
The rule and the exemptions will be modified.

Only the second alternative (the “as is” option) could realistically be implemented by the current deadline of April 10. But, that’s the alternative that is, in my opinion, the least likely to happen. While it is low probability, it is high risk in the sense that broker-dealers and RIAs must be in compliance by April … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #26

Posted on November 1, 2016, by Fred Reish in BICE, Broker-Dealers, DOL Activity, fiduciary, prohibited transaction, Service Providers. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #26

Reasonable Compensation for IRAs: When and How Long?

This is my twenty-sixth article about interesting observations concerning the fiduciary rule and exemptions.

This article is a little different than most of my previous posts. However, it is equally as important. To get to the point, I am writing this article about reasonable compensation for advice to IRAs because of a common misunderstanding about the requirement.

In the last month or two, I have seen a number of articles and heard several comments to the effect that it will be difficult to determine reasonable compensation for IRAs because the rule is so new. Stated a little differently, the point is that the reasonable compensation requirement for IRAs will first become effective on April 10, 2017. That is not correct.

Section 4975(c)(1)(C) provides that the “furnishing of . . . services . . . between a … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #24

Posted on October 20, 2016, by Fred Reish in BICE, Broker-Dealers, DOL Activity, fiduciary, prohibited transaction, prudent, Registered Investment Advisers, RIA. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #24

The Meaning of Differential Compensation Based on Neutral Factors

This is my twenty-fourth article covering interesting observations about the fiduciary rule and exemptions.

The DOL’s fiduciary “package” consists of a regulation that expands the definition of advice and exemptions, or exceptions, from the prohibited transaction (PT) rules. If a recommendation by a fiduciary adviser does not constitute a PT (e.g., does not affect the adviser’s compensation, or that of an affiliate, and does not cause a payment from a third party), no exemption is needed. However, if the fiduciary recommendation causes a PT, an exemption must be used – and most often that will be BICE – the Best Interest Contract Exemption. Therein lies the rub . . . the compensation of the financial institution (e.g., the broker-dealer) and the adviser are regulated by BICE.

Under BICE, the compensation of broker-dealers can be … Read More »




Recent Insights

Interesting Angles on the DOL’s Fiduciary Rule #67

Fiduciary Rule: From the DOL to the SEC

This is my 67th article about interesting observations concerning the Department of Labor’s (DOL) fiduciary rule and...

Interesting Angles on the DOL’s Fiduciary Rule #66

Concerns About 408(b)(2) Disclosures

This is my 66th article about interesting observations concerning the Department of Labor’s fiduciary rule and exemptions. These articles also...

Interesting Angles on the DOL’s Fiduciary Rule #65

Unexpected Consequences of Fiduciary Rule

This is my 65th article about interesting observations concerning the Department of Labor’s fiduciary rule and exemptions. These articles also...