Category: Service Providers


Fiduciary Advice and 12b-1 Fees

Posted on March 21, 2013, by Fred Reish in Broker-Dealers, DOL Activity, fiduciary, prohibited transaction, Registered Investment Advisers, RIA, Service Providers. Comments Off on Fiduciary Advice and 12b-1 Fees

The DOL recently settled a case for $1,265,608.70 with a firm that provided investment advice to retirement plans. Based on the DOL’s press release, the firm served as a fiduciary investment adviser to ERISA plans and recommended investments in mutual funds. In addition to the firm’s advisory fee, it also received 12b-1 fees.

Based on the press release, it appears that the DOL asserted two claims. The first is that the receipt of additional fees (which could include both 12b-1 fees and some forms of revenue sharing) is a violation of the prohibited transaction rules in section 406(b) of ERISA.

The second theory appears to be that, where a fiduciary adviser receives undisclosed compensation, the adviser has, in effect, set its own compensation (to the extent of the undisclosed payments). In the past, the DOL has successfully taken the position that, by … Read More »


Anticipated DOL Guidance

Posted on February 20, 2013, by Fred Reish in 408(b)(2), DOL Activity, fiduciary, Plan Sponsors, Service Providers. Comments Off on Anticipated DOL Guidance

The Department of Labor recently issued its agenda for regulatory guidance. Several of the projects will impact retirement plans and particularly 401(k) plans. This email focuses on a DOL project to amend the 408(b)(2) regulation to possibly require that cover service providers furnish a “guide” or similar tool, along with the disclosures. In its description of the project, the DOL states: “A guide or similar requirement may assist fiduciaries, especially fiduciaries to small and medium-sized plans, in identifying and understanding the potentially complex disclosure documents that are provided to them or if the disclosures are located in multiple documents.”

As background, the final 408(b)(2) regulation contain a sample guide. Covered service providers may want to review that part of the regulatory package in order to understand the DOL’s approach. Briefly described, though, that guide would require that, for each mandated disclosure, … Read More »


408(b)(2) Violations and Service Provider Correction Program

Posted on October 18, 2012, by Fred Reish in 408(b)(2), Broker-Dealers, Recordkeeper, Registered Investment Advisers, RIA, Service Providers. Comments Off on 408(b)(2) Violations and Service Provider Correction Program

The failure of a covered service provider (for example, a broker-dealer, RIA or recordkeeper) to provide adequate 408(b)(2) disclosures results in a prohibited transaction . . . for both service providers and plan sponsors. While the regulation has an exemption for plan sponsors (if they follow certain steps), there is no similar exemption for covered service providers. 


408(b)(2) Disclosures for Related Parties

Posted on June 20, 2012, by Fred Reish in 408(b)(2), Broker-Dealers, fiduciary, Registered Investment Advisers, RIA, Service Providers. Comments Off on 408(b)(2) Disclosures for Related Parties

One of our concerns about disclosures by broker-dealers (and affiliated RIAs) is that they may not fully appreciate the concept of related parties under the 408(b)(2) regulation.

When a broker-dealer is a covered service provider and contracts with others to provide some of the services, the broker-dealer and those other parties are “related” for purposes of the regulation and its disclosure requirements. In those cases, the compensation of the related party (as opposed to the broker-dealer) must be disclosed if it is (1) transactional or (2) charged against the plan’s investments. In some cases, there may be other required disclosures.


408(b)(2) Compliance

Posted on June 7, 2012, by Fred Reish in 408(b)(2), DOL Activity, fiduciary, Service Providers. Comments Off on 408(b)(2) Compliance

As you know, I have done a series of short articles about overlooked and misunderstood issues for 408(b)(2) compliance. This article continues that series.


408(b)(2) Disclosures for Solicitor’s Fees

Posted on May 29, 2012, by Fred Reish in 408(b)(2), prohibited transaction, Registered Investment Advisers, RIA, Service Providers. Comments Off on 408(b)(2) Disclosures for Solicitor’s Fees

In my last article, I discussed our concerns about the lack of awareness of discretionary investment managers concerning 408(b)(2) disclosures. This article addresses another one of our concerns . . . 408(b)(2) disclosures by advisers who refer investment managers and receive solicitor’s fees.


ERISA Disclosures for Discretionary Investment Managers

Posted on May 17, 2012, by Fred Reish in 408(b)(2), prohibited transaction, Service Providers. Comments Off on ERISA Disclosures for Discretionary Investment Managers

Covered service providers must make their 408(b)(2) disclosures by July 1, 2012—just weeks away. The failure to make those disclosures will cause their agreements with ERISA plans to become prohibited transactions, resulting in re-payments of compensation to the plans, taxes, interest and penalties.


DOL Activity in 2012

Posted on April 30, 2012, by Fred Reish in 404a-5, 408(b)(2), Broker-Dealers, DOL Activity, fiduciary, Plan Sponsors, Registered Investment Advisers, RIA, Service Providers, TPA. Comments Off on DOL Activity in 2012

At first blush, it seems like 2012 is the year of plan disclosures and participant disclosures. The 408(b)(2) regulation is effective July 1, 2012, and the 404a-5 regulation follows two months later. However, there is more DOL activity than initially meets the eye.


When are AAMs Considered DIAs?

Posted on April 19, 2012, by Fred Reish in 404a-5, 408(b)(2), Broker-Dealers, fiduciary, Recordkeeper, Registered Investment Advisers, RIA, Service Providers. Comments Off on When are AAMs Considered DIAs?

There is an emerging issue under both the participant and plan disclosure rules concerning the information that must be provided for asset allocation models (AAMs).

It appears that some DOL officials are of the opinion that asset allocation models—at least under certain circumstances—are “designated investment alternatives” or DIAs. If AAMs are classified as DIAs, they are subject to disclosure requirements under both the plan and participant disclosure rules. As a practical matter, it may be impractical or even impossible for recordkeepers, broker-dealers and RIAs to provide that information.


Finally the Final … 408(b)(2) Regulation

Posted on February 3, 2012, by Fred Reish in 403(b), 408(b)(2), DOL Activity, fiduciary, Service Providers. Comments Off on Finally the Final … 408(b)(2) Regulation

The DOL issued the final 408(b)(2) regulation on February 2, 2012.

Key points are:

The extension of the effective date to July 1, 2012;
The fact that service providers are not required to provide a summary of the disclosures, though the DOL provided a sample “guide” that is not mandatory;
The addition of a requirement to describe the arrangement between a covered service provider and the payer of indirect compensation;
Clarification that electronic transmission of the disclosures is permitted;
Relief from the disclosure requirements for “frozen” 403(b) contracts;
A new requirement that plan sponsors terminate the relationship with a service provider who fails or refuses to provide information on request;
Limited relief for disclosures for brokerage accounts and similar arrangements.

Bruce Ashton and I have drafted a more detailed Alert for our law firm, Drinker Biddle & Reath LLP.  That Alert is located at:

http://www.drinkerbiddle.com/resources/publications/2012/finally-the-final-408b2-regulation

 




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