Category: prudent


Interesting Angles on the DOL’s Fiduciary Rule #70

Posted on November 15, 2017, by Fred Reish in BICE, DOL Activity, fiduciary, Plan Sponsors, prudent, Recordkeeper, Registered Investment Advisers, RIA. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #70

The Fiduciary Rule and Recordkeeper Services

This is my 70th 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.

Almost all of my Angles articles have been about the impact of the fiduciary rule on advisors—representatives of broker-dealers and RIAs. However, the fiduciary rule also affects recordkeepers and the services that they offer to plans and advisors. In that regard, most of the work that we are doing for recordkeepers falls into three categories:

Acceptance of fiduciary responsibility by recordkeepers for “financial wellness” of participants.
Providing investment services and support for advisors, without becoming a fiduciary.
Providing investment services and support for plan sponsors, without becoming a fiduciary.

The next few Angles articles will discuss these issues in detail. This article is … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #68

Posted on November 2, 2017, by Fred Reish in Broker-Dealers, DOL Activity, fiduciary, prudent, Registered Investment Advisers, RIA, SEC, Uncategorized. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #68

Recommendations of Distributions: The SEC Joins the Fray

This is my 68th 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.

In 2013, FINRA put its stake in the ground on recommendations of distributions and rollovers when it issued Regulatory Notice 13-45. The DOL has, with the development of its fiduciary regulation over the past few years—which became applicable on June 9 of this year—taken a similar, but more demanding position. However, the DOL’s guidance has more teeth than FINRA’s, because it is backed by a standard of care—the prudent man rule and duty of loyalty—and by the prohibited transaction rules in ERISA and the Internal Revenue Code. Recently, the SEC has joined the fray with the issuance … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #67

Posted on October 25, 2017, by Fred Reish in BICE, DOL Activity, fiduciary, prudent, SEC. Comments Off on 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 exemptions. These articles also cover the DOL’s FAQs interpreting the regulation and exemptions, and related developments in the securities laws.

It now seems certain that the DOL will extend the applicability date of the final exemptions to July 1, 2019, or thereabouts. In any event, it will be a long extension. As a practical matter, that means that the transition rules under the Best Interest Contract Exemption (BICE) and Prohibited Transaction Exemption 84-24 will be extended until June 30, 2019 . . . in other words, the transition rules will continue until the applicability of revised final exemptions.

The extended time will be used for the DOL and the Securities and Exchange Commission (SEC) to cooperate in the … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #66

Posted on October 18, 2017, by Fred Reish in 408(b)(2), Broker-Dealers, fiduciary, prudent, Registered Investment Advisers, RIA, Service Providers. Comments Off on 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 cover the DOL’s FAQs interpreting the regulation and exemptions and related developments in the securities laws.

Because of the change in the definition of fiduciary advice (which applied on June 9, 2017), all advisors to retirement plans need to review their prior 408(b)(2) disclosures to see if changes are necessary. That particularly applies to broker-dealers and life insurance brokers and agents.

The first level of review should be to determine whether their prior 408(b)(2) disclosures to ERISA retirement plans affirmatively stated that they were not fiduciaries to the plans that they served. If so, those broker-dealers, insurance brokers and agents need to send out new 408(b)(2) disclosures that affirmatively disclose their new-found fiduciary status (assuming that their advisors … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #65

Posted on October 11, 2017, by Fred Reish in BICE, DOL Activity, fiduciary, prohibited transaction, prudent. Comments Off on 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 cover the DOL’s FAQs interpreting the regulation and exemptions and related developments in the securities laws.

The fiduciary and best interest standards of care, as well as the prohibited transaction rules, will impact advisors in some unexpected ways. That is particularly true of investment advice to IRAs. Here is an example.

When plan or IRA assets are held by a custodian, an advisor often has the ability to recommend either transaction-fee (TF) mutual funds or no-transaction fee (NTF) mutual funds. The recommendation of either TF or NTF funds is a fiduciary act for plan assets, and it will be a best interest act for IRA assets—if the advisor or his or her firm receives any payments beyond a … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #64

Posted on October 5, 2017, by Fred Reish in BICE, DOL Activity, fiduciary, prudent, Uncategorized. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #64

What Does the Best Interest Standard of Care Require?

This is my 64th 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 best interest standard of care is found, among other places, in the Best Interest Contract Exemption (BICE). The standard is a combination of ERISA’s prudent man rule and duty of loyalty. In fact, in the prudence portion of the definition, the only change is that the words “prudent man” are changed to “prudent person.” But, that begs the question, what does the prudent person rule require?

Generally speaking, it requires the following:

A prudent process by a hypothetical knowledgeable person who obtains and evaluates the information needed to make a careful and skillful decision.
With regard to investments, … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #63

Posted on September 27, 2017, by Fred Reish in BICE, DOL Activity, fiduciary, prohibited transaction, prudent. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #63

Policies and Procedures: The Fourth BICE Requirement

This is my 63rd 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 August 31, the Department of Labor (DOL) issued its proposal to extend the transition period for three prohibited transaction exemptions until July 1, 2019. Those exemptions are the Best Interest Contract Exemption (BICE), the 84-24 exemption (for sale of annuities and insurance products), and the Principal Transactions Exemption. In all likelihood, the DOL will finalize that extension within the next 60 days.

The practical effect will be to both delay the applicability date of the final exemptions until July 1, 2019 and to extend the transition versions of those exemptions until June 30, 2019.

However, the DOL is not … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #61

Posted on September 11, 2017, by Fred Reish in DOL Activity, fiduciary, prudent, Service Providers. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #61

The Fiduciary Rule, Distributions and Rollovers

This is my 61st 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.

Now that it seems likely that the fiduciary rule and the transition exemptions will continue “as is” until at least July 1, 2019, it’s time to re-visit the fiduciary rule and the requirements of the transition exemptions. This article focuses on the requirements for recommending that a participant take a distribution and roll it over to an IRA with a financial institution and its advisor. (Practically speaking, the financial institutions will likely be broker-dealers, RIA firms, and banks and trust departments). For ease of reading, this article uses “advisor” to refer to both the entity and the individual.

In order to … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #54

Posted on July 6, 2017, by Fred Reish in BICE, DOL Activity, fiduciary, prudent. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #54

The DOL’s RFI and Possible Changes to BICE

This is my 54th 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 issued a Request for Information (RFI) about the fiduciary regulation and the prohibited transition exemptions. The questions in the RFI indicate the issues of greatest interest to the DOL and, in some cases, are suggestive of possible outcomes. This article looks at two issues concerning BICE–the Best Interest Contract Exemption.

The first question is about a possible extension of the transition rules, now scheduled to expire on December 31 of this year. The DOL asks:

“Would a delay in the January 1, 2018, applicability date of the provisions in the BIC Exemption, Principal Transactions … Read More »


Interesting Angles on the DOL’s Fiduciary Rule #53

Posted on June 28, 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 #53

The Fiduciary Rule and Discretionary Investment Management

This is my 53rd 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.

In recent conversations I have learned that many broker-dealers and RIAs do not understand how the prohibited transaction rules and exemptions (and, particularly, the Best Interest Contract Exemption) apply differently to discretionary accounts and non-discretionary accounts. This article discusses some of those differences.

One similarity, though, is that ERISA’s prudent man rule and duty of loyalty apply for both discretionary and non-discretionary advice to retirement plans and participants.

However, ERISA does not generally govern investment advice to IRAs. As a result, absent the need for a prohibited transaction exemption, advisers to IRAs will not be governed by fiduciary/best interest standard of … Read More »




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