Category Archives: Registered Investment Advisers

Best Interest Standard of Care for Advisors #29

Best Interest Standard and Recommendations of Rollovers and Withdrawals

On June 15, SEC Chairman Clayton issued a statement partially entitled:  “Need for Increased Care when Recommending 401(k)/IRA Rollovers and Withdrawals . . .”. As that title suggests, the Chairman’s statement covers areas where the SEC will focus on recommendations when Reg BI applies on June 30. One of those areas of “increased care” is the recommendation of rollovers (and other withdrawals) from retirement plans.

The best interest standard for investment advisers became applicable last year. As a result, the Chairman’s statement already applies to rollover recommendations by investment advisers.

One part of the statement is entitled:  “Areas Where Increased Care May be Necessary When Making Recommendations to Main Street Investors“. In that part, the statement says:

Continue reading Best Interest Standard of Care for Advisors #29

Share

Best Interest Standard of Care for Advisors #26

Regulation Best Interest: Recommendations of Account Types (Part 2)

The SEC has issued its final Regulation Best Interest (Reg BI), Form CRS Rule, RIA Interpretation and Solely Incidental Interpretation. I am discussing the SEC’s guidance in a series of articles entitled “Best Interest Standard of Care for Advisors.”


In my last post (Best Interest for Advisors #25), I discussed the SEC guidance for broker-dealers and investment advisers on recommendations of account types. The article explained that investment advisers are subject to the best interest standard for recommending account types (since July of last year) and broker-dealers will be subject to the new best interest rules for recommending account types (beginning June 30 of this year).

The focus of the article, though, was to define what an account type was. As the article explained, “account type” is to be interpreted very broadly and includes many programs and accounts that may not obviously be considered types of accounts. As a result, the first compliance step for broker-dealers and investment advisers is to identify all of the account types they offer. Then those firms can develop the processes for their advisors to consider the types of accounts (and compare different types of accounts) offered by the firm . . . in light of the investor’s needs. (The rules apply to retail customers of broker-dealers and all clients of investment advisers.)

Continue reading Best Interest Standard of Care for Advisors #26

Share

Best Interest Standard of Care for Advisors #25

Regulation Best Interest, RIA Interpretation and Consideration of “Account Types” (Part 1)

The SEC has issued its final Regulation Best Interest (Reg BI), Form CRS Rule, RIA Interpretation and Solely Incidental Interpretation. I am discussing the SEC’s guidance in a series of articles entitled “Best Interest Standard of Care for Advisors.”


Regulation Best Interest (Reg BI) and the Interpretation Regarding Standard of Conduct for Investment Advisers (RIA Interpretation) require that broker-dealers  and investment advisers evaluate the account types their firms offer—in light of the investor’s investment profile—to make a best interest recommendation. In other words, both types of firms, and their advisors, must first consider the account type that is appropriate for the investor. That raises the obvious question of “What is an account type?”

Before answering that question, let’s look at what the SEC said about the need to consider account types as a part of a best interest process.

Continue reading Best Interest Standard of Care for Advisors #25

Share

Best Interest Standard of Care for Advisors #23

Regulation Best Interest: SEC 2020 Examination Priorities—Examinations for Compliance With Reg BI and the Investment Adviser Interpretation

The SEC has issued its final Regulation Best Interest (Reg BI), Form CRS Rule, RIA Interpretation and Solely Incidental Interpretation. I am discussing the SEC’s guidance in a series of articles entitled “Best Interest Standard of Care for Advisors.”

My last post on Best Interest for Advisors #22 discussed the FINRA 2020 Examination Priorities (https://www.finra.org/sites/default/files/2020-01/2020-risk-monitoring-and-examination-priorities-letter.pdf) provisions on examinations for compliance with Reg BI and Form CRS. This article discusses the SEC’s 2020 Examination Priorities (https://www.sec.gov/about/offices/ocie/national-examination-program-priorities-2020.pdf) provisions on compliance with Interpretation Regarding Standard of Conduct for Investment Advisers (“RIA Interpretation”) and Form CRS (as well as compliance by broker-dealers with Reg BI).

Continue reading Best Interest Standard of Care for Advisors #23

Share

Best Interest Standard of Care for Advisors #21

Regulation Best Interest: Rollover Recommendations and Mitigation of Advisor Incentives (Rollovers Part 7)

The SEC has issued its final Regulation Best Interest (Reg BI), Form CRS Rule, RIA Interpretation and Solely Incidental Interpretation. I am discussing the SEC’s guidance in a series of articles entitled “Best Interest Standard of Care for Advisors.”

This is the 7th of my series of articles about rollover recommendations and rollover education under the SEC’s Regulation Best Interest and its Interpretation for Investment Advisers. (For the first six, see Best Interest for Advisors #’s 15161718, 19 and 20.)


This article deals with the Reg BI requirement that broker-dealers mitigate the incentives that might induce their advisors to make rollover recommendations that are not in the best interest of participants. Specifically, that requirement (which applies on June 30, 2020) is:

Continue reading Best Interest Standard of Care for Advisors #21

Share

Best Interest Standard of Care for Advisors #18

Regulation Best Interest: Rollover Recommendations for Investment Advisers (Rollovers Part 4)

The SEC has issued its final Regulation Best Interest (Reg BI), Form CRS Rule, RIA Interpretation and Solely Incidental Interpretation. I am discussing the SEC’s guidance in a series of articles entitled “Best Interest Standard of Care for Advisors.”


In earlier posts (e.g., Best Interest for Advisors #15), I discussed the application of Reg BI, and its Best Interest Standard of Care, to rollover recommendations. However, the requirement to act in the best interest of a plan participant for rollover recommendations is not limited to broker-dealers; it also applies to investment advisers. That was explained in the SEC’s Interpretation Regarding Standard of Conduct for Investment Advisers, issued June 5, 2019 and effective on July 12, 2019.

Continue reading Best Interest Standard of Care for Advisors #18

Share

Best Interest Standard of Care for Advisors #8

Senior Clients: The SEC is looking at practices of RIAs

I am writing two series of articles that together are called “The Bests.” One is about Best Practices for plan sponsors, while the other is about the Best Interest Standard of Care for advisors. Each series is numbered separately to make it easier to identify the subject that is most relevant to you.

This is the eighth of the series about Best Interest Standard of Care for Advisors.

The SEC has initiated examinations of investment advisers concerning their practices in working with Senior Clients. According to the SEC, a “ ‘Senior Client’ is defined as any retail advisory client who is age 62 or older, retired, or transitioning to retirement, including accounts of deceased clients, and retail clients in joint accounts with at least one individual meeting this definition.”

Continue reading Best Interest Standard of Care for Advisors #8

Share

Best Interest Standard of Care for Advisors #7

What Does Best Interest Mean . . . In the Real World? (Part 4)

I am writing two series of articles that together are called “The Bests.” One is about Best Practices for plan sponsors, while the other is about the Best Interest Standard of Care for advisors. Each series is numbered separately to make it easier to identify the subject that is most relevant to you.

This is the seventh of the series about the Best Interest Standard of Care.

In my last three posts (Best Interest Standard of Care for Advisors #4 and #5 and #6), I discuss the Best Interest standard of care and its practical application. This article discusses a novel approach for compliance with the fiduciary standard for the selection of investments for 401(k) plans. All the more interesting, the approach was part of an opinion of the U.S. First Circuit Court of Appeals.

In October 2018, the First Circuit considered an appeal of a 401(k) case where Putnam Investments, and its fiduciaries, were the defendants. At one point, the defendants argued that, if the court found fiduciary liability under the facts of the case, it would discourage employers from adopting 401(k) plans. The Court of Appeals responded by saying:

“While Putnam warns of putative ERISA plans foregone for fear of litigation risk, it points to no evidence that employers in, for example, the Fourth, Fifth, and Eighth Circuits [which found that similar facts could result in liability], are less likely to adopt ERISA plans.” Continue reading Best Interest Standard of Care for Advisors #7

Share