Disclosures for Individual Brokerage Accounts
In DOL Field Assistance Bulletin (FAB) 2012-02R, the Department of Labor explained the disclosures for individual brokerage accounts in participant-directed plans. I am concerned that many broker-dealers have not focused on these new “requirements.” That is true for several reasons, including:
- So much money and energy have been devoted to complying with the plan disclosure requirements, that is, the 408(b)(2) disclosures.
- The 404a-5, or participant, disclosure requirements are imposed on plan sponsors, in their fiduciary capacity. Stating this slightly differently, the participant disclosures for brokerage accounts are not imposed on broker-dealers, but instead are placed on the shoulders of the plan sponsors. Since it is not a legal responsibility for broker-dealers, it has not received the same attention as the 408(b)(2) disclosures. However, as a practical matter, plan sponsors will turn to the broker-dealers and insist that they satisfy those disclosure requirements. That seems like a reasonable position, since the information is in the control of the broker-dealers.
The FAB provides detailed information about the requirements. To name a few, there is a requirement for a written description of the brokerage account; there must also be an explanation of any fees and expenses that are likely to be incurred in the brokerage account; and, participants must be provided with statements, at least quarterly, describing the fees and charges, both as dollar amounts and in a narrative form.
My sense is that few broker-dealers are prepared to offer assistance at that level of detail. However, I expect that will change now that the work on the 408(b)(2) disclosures is behind us.