Category: FINRA


Best Interest and Best Practices: Improving Retirement Outcomes #2

Posted on September 19, 2018, by Fred Reish in best interest, DOL Activity, FINRA, prudent, Reg BI, SEC. Comments Off on Best Interest and Best Practices: Improving Retirement Outcomes #2

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

In my last post, I discuss the remarkable similarities among the SEC’s proposed Regulation Best Interest, the SEC’s proposed Interpretation for investment advisors, the DOL’s Best Interest standard of care (which is a combination of ERISA’s prudent man rule and duty of loyalty), and the New York State Best Interest standard for sales of annuities and insurance products. All of those rules require that advisors act with care, skill, prudence and diligence, and that they place the interests of the investor ahead of their own.

In the first post, I conclude that the Best … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #100

Posted on August 6, 2018, by Fred Reish in BICE, Broker-Dealers, DOL Activity, FINRA, Registered Investment Advisers, RIA, SEC. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #100

Investment Advisers and the SEC’s Interpretation of Their Duties: Part II

This is my 100th article about interesting observations—or “angles”—concerning the Department of Labor’s Fiduciary Rule and the SEC’s “best interest” proposals.

Part I of this post discussed the application of the SEC’s best interest standard to recommendations to participants to take distributions and rollover to IRAs. It also discussed the apparent requirement for a thoughtful and professional process to develop the recommendation. However, it reserved for this post, Part II, the factors to be considered in that process.

The RIA Interpretation lists a number of factors to consider in the best interest process. However, most of them apply to investment recommendations, rather than advice about distributions. But a few are helpful. For example, the costs of investments and services and consideration of the investor profile are relevant factors.

Under Reg BI, though, the … Read More »


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 »


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 »


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 »


Interesting Angles on the DOL’s Fiduciary Rule #90

Posted on May 14, 2018, by Fred Reish in BICE, Broker-Dealers, DOL Activity, fiduciary, FINRA, prudent, Registered Investment Advisers, RIA, SEC. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #90

Parallels Between the SEC Regulation Best Interest and the DOL Best Interest Contract Exemption (Part 1)

This is my 90th 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.

The SEC’s proposed Regulation Best Interest (“Reg BI”) is remarkable in its similarities to the DOL’s vacated Best Interest Contract Exemption (“BICE”). This article describes some of those similarities. Keep in mind as you read this that Reg BI applies to securities recommendations, while BICE would have covered any investment or insurance recommendation by a fiduciary advisor.

Reg BI, if finalized, will require that broker-dealers and their representatives act in the “best interest” of “retail customers,” which includes IRA owners and participants. The DOL’s BICE also would have required that … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #85

Posted on April 3, 2018, by Fred Reish in BICE, Broker-Dealers, DOL Activity, FINRA, prohibited transaction, Registered Investment Advisers, RIA, SEC. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #85

The Fiduciary Rule: What’s Next (Part 1)?

This is my 85th 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.

By now, it’s common knowledge that the 5th Circuit Court of Appeals has thrown out the fiduciary rule. That includes the regulation expanding the definition of fiduciary advice and the related prohibited transaction exemptions, for example, the Best Interest Contract Exemption (BICE). At the same time, the SEC is working on a new “best interest” standard of care, and the DOL is working on amending the fiduciary regulation and related exemptions.

That raises the critical questions . . . where are we now and where are we going?

Let’s start by looking at the issues that the DOL and … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #82

Posted on March 6, 2018, by Fred Reish in BICE, DOL Activity, fiduciary, FINRA, Registered Investment Advisers, RIA, SEC. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #82

Undisclosed (and Disclosed) 12b-1 Fees: The Different Views of the SEC and DOL

This is my 82nd 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.

On February 12, 2018, the SEC announced a remedial program called the “Share Class Selection Disclosure Initiative” (“SCSDI”). Simply stated, the temporary program says that investment advisers who have received undisclosed 12b-1 fees can correct and self-report. In that case, the SEC staff will not recommend financial penalties. However, if an investment adviser does not correct and self-report and the SEC later examines the adviser and discovers those undisclosed payments, the staff will likely be more aggressive about recommending penalties (because the advisers were given the opportunity to self-correct, but failed to … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #79

Posted on February 14, 2018, by Fred Reish in BICE, Broker-Dealers, DOL Activity, fiduciary, FINRA, prudent, Registered Investment Advisers, RIA, SEC. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #79

The Fiduciary Rule: Mistaken Beliefs (#4)

This is my 79th 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.

This post continues my series on myths about the fiduciary rule and prohibited transaction exemptions. This article focuses on the issue of “reasonable compensation” for RIAs, broker-dealers and their advisors for their services to retirement plans and IRAs (“qualified accounts”), and what, if any, changes will be made to that requirement. The myth is that the SEC will draft rules that eliminate the reasonable compensation rule. That is incorrect. The reasonable compensation limitation on advisors and their supervisory entities is here to stay.

This article explains why the reasonable compensation limits are here to stay and what advisors and their … Read More »


FINRA 2018 Annual Regulatory and Examination Priorities Letter Makes No Mention of a Fiduciary Duty for Brokers

Posted on February 8, 2018, by Fred Reish in FINRA. Comments Off on FINRA 2018 Annual Regulatory and Examination Priorities Letter Makes No Mention of a Fiduciary Duty for Brokers

FINRA released its 2018 Annual Regulatory and Examination Priorities Letter (Priorities Letter) on January 8, 2018. While FINRA advises that it can change its priorities in response to circumstances, the purpose of the Priorities Letter is to permit broker-dealers to plan their compliance, supervisory and risk management programs and to prepare for FINRA examinations. Therefore, this Priorities Letter is significant both in what it says and in what it has chosen not to say including failing to discuss FINRA’s views regarding a “fiduciary standard.”

My colleagues, Sandy Grannum, Jim Lundy, Jamie Helman, and I wrote a post about this issue for the Broker-Dealer Regulation & Litigation Insights blog. Read more here.




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