New Rule, Old Rule: What Should Advisers Do Now?
This is my 40th 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 clear that the applicability date of the new fiduciary regulation will be delayed, many advisers (including broker-dealers and RIA firms) may heave a sigh of relief. However, while some relief is justified, that does not mean that their services are not governed, in many cases, by the “old” fiduciary regulation. (By “old” rule, I refer to the DOL regulation that defines fiduciary advice and that has been in effect for decades.) With all the attention that has been devoted to fiduciary status and prohibited transactions, it is possible, perhaps even probable, that the … Read More »
FINRA Regulatory Notice 13-45: Guidance on Distributions and Rollovers
This is my 39th 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.
Even though the DOL fiduciary rule is being delayed, other regulators have indicated their interests in protecting participants from inappropriate recommendations to take plan distributions and roll over to IRAs.
FINRA, which oversees broker-dealers, addressed rollover recommendations to participants in Regulatory Notice 13-45. In describing the purpose of the notice, FINRA said:
“FINRA is issuing this Notice to remind firms of their responsibilities when (1) recommending a rollover or transfer of assets in an employer-sponsored retirement plan to an Individual Retirement Account (IRA) or (2) marketing IRAs and associated services.”
FINRA noted that:
“A broker-dealer’s recommendation that … Read More »
The Department of Labor (DOL) published a proposed rule to delay the applicability date of the fiduciary rule from April 10 to June 9. The proposal for the delay will still need to go through a regulatory process, including a 15 day comment period; however we expect that the DOL will make the delay effective immediately upon the final regulation’s publication to the Federal Register. The DOL also announced a 45 day comment period on policy issues raised in the February 3 Presidential Memorandum. There are three possible outcomes at the end of the 45 day comment period. In this Alert, we discuss the regulatory process and when the delay might actually go into effect, as well as the possible outcomes at the end of the 45 day period.
SEC Examinations of RIAs and Broker-Dealers under the ReTIRE Initiative
This is my 38th 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.
As explained in my last post (Angles #37), the SEC’s Office of Compliance Inspections and Examinations (OCIE) issued a National Exam Program Risk Alert concerning examinations about services offered by RIAs and broker-dealers to investors with retirement accounts. One of the areas specifically identified for those examinations is “Reasonable Basis for Recommendations.” The OCIE described that issue as:
“Registrants have important obligations under the federal securities laws and SRO rules (with respect to broker-dealers) when making recommendations or providing investment advice. To the extent applicable and required, the staff will assess the actions of registrants and their representatives for consistency with these … Read More »
SEC Retirement-Targeted Examinations
This is my 37th 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 2015, the Office of Compliance Inspections and Examinations (OCIE) of the SEC issued a National Exam Program Risk Alert describing its “Retirement-Targeted Industry Reviews and Examinations Initiative” (ReTIRE). The Initiative announces that the OCIE “will conduct examinations of SEC-registered investment advisers and broker-dealers (collectively, registrants) under the ReTIRE Initiative that will focus on certain high-risk areas of registrants’ sales, investment and oversight processes, with particular emphasis on select areas where retail investors saving for retirement may be harmed.”
In its Risk Alert, the OCIE says:
“The staff intends to use data analytics, information from prior examinations, and examiner-driven due diligence to identify registrants to … Read More »
Retirement Advice and the SEC
While the DOL’s fiduciary regulation and prohibited transaction exemptions have occupied everyone’s attention over the last year, other regulatory agencies have been focusing on retirement plan issues, as well.
For example, in its “Examination Priorities for 2017,” the SEC has indicated that it will focus on “Senior Investors and Retirement Investments.” Specifically, the SEC says:
As the U.S. population ages and investors become more dependent than ever on their own investments for retirement income, we are devoting increased attention to issues affecting senior investors and those investing for retirement.
ReTIRE. We will continue our multi-year ReTIRE initiative, focusing on investment advisers and broker-dealers along with the services they offer to investors with retirement accounts. This year, these examinations will likely focus on, among other things, registrants’ recommendations and sales of variable insurance products as well as the … Read More »
Presidential Memorandum on Fiduciary Rule
Last Friday, the White House directed a memorandum to the DOL to review the fiduciary regulation and the related exemptions (the “fiduciary rules”).
This article discusses what the memo did and did not do, and what the next steps are.
As a legal matter, the memo was more “show” than “go,” in the sense that it did not delay, withdraw or modify the fiduciary rules. Instead, it directed the DOL to evaluate the rules and to determine if they should become applicable, be modified or be withdrawn.
Shortly after the memo was signed, the Acting Secretary of Labor said that the Department would look into possible legal actions to delay the application of the rule. While that clearly indicates a desire to delay the applicability date beyond April 10th, it also suggests that the DOL has not decided if … Read More »
A Seminar Can Be a Fiduciary Act
This is my 34th 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.
Last week, the DOL issued its second set of FAQs on the fiduciary rule and conflict of interest exemptions. For the most part, the DOL’s answers were consistent with the industry’s understanding of the rules. However, a few were particularly interesting. For example, Question 17 asked:
Q17. Would a free dinner seminar offered by an investment adviser as a means of marketing services or investments to a group of retirees or individuals approaching retirement be a widely attended speech or conference within the meaning of the general communications provision of the Rule?
Before giving you the answer, let me explain the significance of the question. If … Read More »
Discretionary Management, Rollovers and BICE
This is my 33rd 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.
Most broker-dealers and RIA firms are familiar with the provisions of the Best Interest Contract Exemption (BICE) and with the fact that, as a general rule, BICE applies only to non-discretionary investment advice. But, that isn’t the end of the story. There are some situations in which discretionary management can be used for recommendations that are covered by BICE. For example, if a representative of a broker dealer or an RIA prudently recommends a distribution and IRA rollover (satisfying the Level Fee Fiduciary conditions), the IRA may be invested using discretionary investment manager. (Note, though, that the discretionary investment management must be provided by a “pure” Level Fee … Read More »
Please join us for the nineteenth Inside the Beltway presentation, scheduled for January 26, 2017. This is the next session in an ongoing series of free audiocasts presented by Fred Reish and Brad Campbell, of Drinker Biddle & Reath, discussing developments in Washington that directly impact our industry. The presentation is sponsored by Natixis. Click on the linked title, above, to register.
During this session of Beltway we will discuss:
Update on the fiduciary rule
Update on the special Financial Institution status for IMOs and the sale of fixed indexed annuities
Impact of the Congressional proposals for retirement plans
Impact on retirement plans of other priorities of the Trump Administration
The audiocast will be recorded and available to all registrants within a week of the presentation. An Outlook appointment request will be sent with registration confirmation.
Questions? Please contact firstname.lastname@example.org.