Category: prudent


Best Interest and Best Practices #9

Posted on November 13, 2018, by Fred Reish in 401(k), 403(b), best interest, DOL Activity, prudent, Reg BI, Registered Investment Advisers, RIA, SEC. Comments Off on 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 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.

“Best Interest” has because part of the American lexicon . . . as an aspirational goal or a demanding standard—depending on the point of view. But, what does best interest mean? It may mean different things to different people . . . and perhaps even to different regulators. However, I believe that most people would agree on the definition in this article.

As I read the guidance issued by the Department of Labor (DOL), the Securities and Exchange Commission (SEC), and New York State, there are actually two … 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 #5

Posted on October 11, 2018, by Fred Reish in 401(k), 403(b), best interest, Plan Sponsors, prudent, Service Providers. Comments Off on Best Interest and Best Practices #5

What is the Baseline for A Committee to Act in the Best Interest of Its Participants? (Part 2)

This is the fifth of a 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 advisers, and plan sponsors, including 401(k) and 403(b) committees.

This is my second article about the case of Sacerdote v. New York University. As I discussed in my last post, the Court’s opinion pointed out the deficiencies in the understandings and conduct of some committee members. However, the Court ultimately ruled in favor of the plan fiduciaries and against the plaintiffs. Why was that?

Despite the deficiencies (or “bad practices”) of some committee members, others on the committee were engaged and knowledgeable. Obviously, that was an important factor. … Read More »

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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 »

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Best Interest and Best Practices: Improving Retirement Outcomes #1

Posted on September 12, 2018, by Fred Reish in best interest, BICE, prudent, SEC. Comments Off on Best Interest and Best Practices: Improving Retirement Outcomes #1

What is the “Best Interest?”

This is the first of a new series of articles titled “The Bests.” This series will focus 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.

For this inaugural article, let’s talk about the meaning of “Best Interest.”

There are at least four Best Interest standards. (While “best interest” can also refer to management of conflicts of interest, this article is about the best interest standard of care.)

ERISA’s best interest standard of care for plan sponsors and fiduciary advisors for private sector retirement plans. (While ERISA doesn’t literally have a best interest standard—because the Best Interest Contract Exemption was vacated by the 5th Circuit Court of Appeals, that best interest standard was a combination of … Read More »

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Moving from Angles to Bests

Posted on August 15, 2018, by Fred Reish in announcement, Broker-Dealers, DOL Activity, prudent, Registered Investment Advisers, RIA, SEC. Comments Off on Moving from Angles to Bests

Now that I have completed 100 articles about interesting Angles on birth –and death–of the DOL’s Fiduciary Rule, and the birth of an SEC best interest standard for broker-dealers and RIAs, I am going to start on a new series. The new series, rather than being titled “Angles,” will be called “The Bests.”

So, from now on, my articles—maybe the next 100—will focus on two “bests”—the SEC’s best interest standard and best practices for advisors and plan sponsors.

I figure that the SEC’s best interest rules will be developed and implemented over the next year or two, giving me a wealth of materials for new articles. But, I don’t want to be limited to that. I think that it’s important to talk about best practices for retirement plans and retiree investing and withdrawing, with a focus on helping participants to and through … Read More »

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Interesting Angles on the DOL’s Fiduciary Rule #98

Posted on July 16, 2018, by Fred Reish in Broker-Dealers, DOL Activity, prudent, SEC. Comments Off on Interesting Angles on the DOL’s Fiduciary Rule #98

Regulation Best Interest: Consideration of Cost and Compensation

This is my 98th article about interesting observations concerning the Department of Labor’s fiduciary rule and the SEC’s “best interest” proposals.

The SEC’s Regulation Best Interest (Reg BI) proposes a number of major changes to the governance of broker-dealers. For example, it imposes a best interest standard of care on recommendations of securities transactions and it requires that material conflicts of interest involving financial incentives be eliminated or, alternatively, disclosed and mitigated. Based on the SEC’s examples of mitigation, it appears “real” mitigation is expected and not just existing practices with more disclosure.

There are other significant changes. For example, there is an increased focus on the costs and compensation related to recommended securities transactions and investment strategies. The SEC’s discussion explains that:

“[O]ur proposed interpretation of the Care Obligation would make the cost … 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 #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 #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 »

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