Category: fiduciary


Best Interest and Best Practices #8

Posted on November 7, 2018, by Fred Reish in 401(k), 403(b), DOL Activity, fiduciary. Comments Off on Best Interest and Best Practices #8

Fiduciary Training: The Need for Basics

This is the 8TH of a new series of articles titled “The Bests.” The series focuses on Best Interest and Best Practices. Those topics give me flexibility to discuss a range of subjects that affect both service providers, including advisors, and plan sponsors, including 401(k) and 403(b) committees.

In three earlier posts—Bests #4, #5, and #6—about the Sacerdote v. New York University decision, I discussed the good and the bad of the NYU plan committee and made several suggestions about best practices for improving committee performance. This article focuses on one of those suggestions—fiduciary education for committee members.

As a starting point, there is not a legal requirement that committee members receive fiduciary training. Instead, it’s a best practice and good risk management.

But, what should the fiduciary education cover? Based on my analysis of court … Read More »

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Best Interest and Best Practices #6

Posted on October 17, 2018, by Fred Reish in best interest, fiduciary, Plan Sponsors, prudent, Service Providers. Comments Off on Best Interest and Best Practices #6

What is the Baseline for A Committee to Act in the Best Interest of its Participants? (Part 3)

 This is the sixth of a new series of articles titled “The Bests.” The series focuses on Best Interest and Best Practices. Those topics give me flexibility to discuss a range of subjects that affect both service providers, including advisors, and plan sponsors, including 401(k) and 403(b) committees.

 In my last two posts (Bests #4 and Bests #5), I discuss the NYU case and the “bad” and “good” behavior of committee members. I concluded my last post with the point that process matters. Of course, it was unspoken that I was referring to a good process. This article discusses the fundamentals of a good process and the lessons learned from the NYU decision.

The NYU committee met quarterly.

There isn’t a prescribed timing … Read More »

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Best Interest and Best Practices #4

Posted on October 3, 2018, by Fred Reish in 401(k), 403(b), fiduciary. Comments Off on Best Interest and Best Practices #4

What is the Baseline for A Committee to Act in the Best Interest of Its Participants? (Part 1)

This is the fourth of a new series of articles titled “The Bests.” The series focuses on Best Interest and Best Practices. Those topics give me flexibility to discuss a range of subjects that affect both service providers, including advisors, and plan sponsors, including 401(k) and 403(b) committees.

The recent decision in the case of Sacerdote v. New York University is a classic story of the good and bad of plan committees. Let’s start with the bad.

Five current and former committee members testified at the trial. But not all of the testimony was helpful.

In the opinion, the Court said that the testimony of one of the co-chairs “was concerning.” The court went on to say:

She made it clear that she viewed her … Read More »

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Interesting Angles on the DOL’s Fiduciary Rule #97

Posted on July 10, 2018, by Fred Reish in DOL Activity, fiduciary, prudent, Registered Investment Advisers, RIA, SEC, Uncategorized. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #97

Regulation Best Interest Recommendations by Broker-Dealers: Part 3

This is my 97th article about interesting observations concerning the Department of Labor’s (DOL) fiduciary rule and the SEC’s “best interest” proposals.

In my last two articles—Part 1 and Part 2 on this topic, I discussed the fact that proposed Reg BI and its best interest standard of care for broker-dealers did not apply to all of the recommendations made by broker-dealers. The proposed best interest standard for broker-dealers will apply only to securities transactions recommended to “retail customers.” (Reg BI defines a “retail customer” as “a person, or the legal representative of such person, who . . . uses the recommendation primarily for personal, family, or household purposes.”) I compared that to the SEC’s Interpretation for RIAs, which applies to all advice to all clients. This article gives examples of how the proposals … Read More »

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Interesting Angles on the DOL’s Fiduciary Rule #96

Posted on June 25, 2018, by Fred Reish in BICE, Broker-Dealers, DOL Activity, fiduciary, Registered Investment Advisers, SEC. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #96

Regulation Best Interest Recommendations by Broker-Dealers: Part 2

This is my 96th article about interesting observations concerning the Department of Labor’s (DOL) fiduciary rule and the SEC’s “best interest” proposals.

In my last post, I compared the proposed best interest standard of care for broker-dealers—the SEC’s Regulation Best Interest (“Reg BI”), and the SEC’s proposed Interpretation Regarding Standard of Conduct for Investment Advisers (“RIA Interpretation”). In that article, I focused on the types of recommendations that implicated the best interest standard of care. For broker-dealers, the best interest standard only applied to recommendations of securities transactions and securities strategies. However, for RIAs the best interest standard applies to all advice and recommendations.

This article focuses on the advice recipients, that is, which investors will be protected by the best interest standard of care if the advice is given by a broker-dealer or, alternatively, … Read More »

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Interesting Angles on the DOL’s Fiduciary Rule #95

Posted on June 19, 2018, by Fred Reish in Broker-Dealers, fiduciary, RIA, SEC. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #95

Regulation Best Interest Recommendations by Broker-Dealers: Part 1

This is my 95th article about interesting observations concerning the Department of Labor’s (DOL) fiduciary rule and exemptions and the SEC’s “best interest” proposals.

By now, you probably know that both the SEC’s proposed Regulation Best Interest (“Reg BI”) for broker-dealers and the Interpretation Regarding Standard of Conduct for Investment Advisers (“RIA Interpretation”) have a best interest standard of care. The Reg BI best interest standard is for broker-dealers, while the RIA Interpretation best interest standard is for investment advisers.

At first blush, that suggests that broker-dealers and RIAs will be governed in the same way. That’s not the case.

While the RIA best interest standard applies to all advice to all clients, Reg BI only applies to securities recommendations made by broker-dealers to retail customers. Those are significant differences.

Let’s take a look at that.

Using the … Read More »

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Interesting Angles on the DOL’s Fiduciary Rule #94

Posted on June 11, 2018, by Fred Reish in Broker-Dealers, DOL Activity, fiduciary, FINRA, Registered Investment Advisers, RIA, SEC, Uncategorized. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #94

SEC Proposed Reg BI and Recommendations of Rollovers (Part 3)

This is my 94th article about interesting observations concerning the Department of Labor’s (DOL) fiduciary rule and exemptions and the SEC’s “best interest” proposals.

Part 1 of this series discussed the provisions in the SEC’s proposed Regulation Best Interest that would impose a best interest standard of care for rollover recommendations by broker-dealers and their registered representatives. (More specifically, the standard applies if the rollover recommendation involves securities transactions—which would ordinarily be the case for participant-directed plans.) Part 2 described some of the considerations for developing a best interest recommendation process.

This article—Part 3—describes the proposed requirement to “mitigate” the conflict of interest inherent in a rollover recommendation.

Since a broker-dealer and its representative would not, in most cases, receive any compensation if a participant does not roll over, there is, to use the … Read More »

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Interesting Angles on the DOL’s Fiduciary Rule #93

Posted on June 5, 2018, by Fred Reish in BICE, Broker-Dealers, DOL Activity, fiduciary, FINRA, SEC. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #93

SEC Proposed Reg BI and Recommendations of Rollovers (Part 2)

This is my 93rd article about interesting observations concerning the Department of Labor’s (DOL) fiduciary rule and exemptions and the SEC’s “best interest” proposals.

In my last post, I described the similarities between the SEC proposed Regulation Best Interest (Reg BI) and the DOL’s Fiduciary Rule (and especially the Best Interest Contract Exemption [BICE]) regarding recommendations to participants to take distributions and roll over into IRAs. The similarities include a best interest standard of care and the treatment of conflicts of interest. This article discusses the requirement of the best interest standard of care in Reg BI and compares it to the standard of care in BICE (and the requirements of FINRA Regulatory Notice 13-45). My next article—Part 3—will cover the conflict of interest issues.

In its discussion of recommendations about distributions and … Read More »

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Interesting Angles on the DOL’s Fiduciary Rule #92

Posted on May 30, 2018, by Fred Reish in Broker-Dealers, DOL Activity, fiduciary, FINRA, prudent, Registered Investment Advisers, RIA, SEC. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #92

SEC Proposed Reg BI and Recommendations of Rollovers (Part 1)

This is my 92nd article about interesting observations concerning the Department of Labor’s (DOL) fiduciary rule and exemptions and the SEC’s “best interest” proposals.

On April 18, 2018, the SEC released three proposals for comment—Regulation Best Interest (“Reg BI”) for broker-dealers, an Interpretation about the Standard of Conduct for RIAs (“RIA Interpretation”), and a CRS—Customer/Client Relationship Summary for both broker-dealers and RIAs. That was the beginning of a lengthy process, and the outcome is uncertain. However, if these rules are finalized, the impact on the securities industry and investors will be significant.

My first reaction is that Reg BI, which imposes a best interest standard of care on broker-dealers, is strikingly similar to the DOL’s Best Interest Contract Exemption (BICE). There are major differences—for example, the SEC proposal does not create a private … Read More »

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Interesting Angles on the DOL’s Fiduciary Rule #91

Posted on May 22, 2018, by Fred Reish in BICE, Broker-Dealers, DOL Activity, fiduciary, SEC. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #91

Parallels Between the SEC Regulation Best Interest and the DOL Best Interest Contract Exemption (Part 2)

This is my 91st article about interesting observations concerning the Department of Labor’s (DOL) fiduciary rule and exemptions. These articles also cover the DOL’s FAQs interpreting the regulation and exemptions and related developments in the securities laws—including the SEC’s “best interest” proposals.

This article continues my discussion of the similarities between the SEC’s proposed Regulation Best Interest (Reg BI) for broker-dealers and the DOL’s Best Interest Contract Exemption (BICE).

In addition to the standard of care (best interest and loyalty), Reg BI also has enhanced protections for conflicts of interest. Interestingly, they closely parallel the DOL’s conditions in BICE. For example, Reg BI proposes to require that material conflicts of interest involving financial incentives be eliminated or, alternatively, be disclosed and mitigated. The key word is “mitigated.” … Read More »

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Best Interest and Best Practices #9

What Does “Best Interest” Mean?

This is the 9th of a new series of articles titled “The Bests.” The series focuses on Best Interest...

Best Interest and Best Practices #8

Fiduciary Training: The Need for Basics

This is the 8TH of a new series of articles titled “The Bests.” The series focuses on Best...

Best Interest and Best Practices #7

SEC Best Interests . . . When? And What About the DOL

This is the 7th of a new series of articles titled “The Bests.”...