Category Archives: broker-dealers

Best Interest Standard of Care for Advisors #72: Compliance with PTE 2020-02: Factors to Evaluate for Recommendations to Change Account Types (Part 7 on FAQ 15)

November 9, 2021
2020-02, best interest, broker-dealers, DOL, fiduciary, investment adviser, IRA, rollovers
Account Types, FAQ, financial institution, investment professional

This series focuses on the DOL’s new fiduciary “rule”, which was effective on February 16. This, and the next several, articles look at the Frequently Asked Questions (FAQs) issued by the DOL to explain the fiduciary definition and the exemption for conflicts of interest.

Key Takeaways

The DOL’s PTE 2020-02 and the expanded definition of fiduciary advice apply to “rollover” recommendations, which include plan-to-IRA rollovers, IRA-to-IRA transfers, plan-to-plan rollovers, IRA-to-plan rollovers, and changes of account types in retirement accounts.
For account-type changes (or “rollovers” in the PTE), the DOL give the example of transfers from commission-based accounts to fee-based arrangements. But that is just an example, and the language is much broader…”from one type of account to another (e.g., from a commission-based account to a fee-based account)”.
Unfortunately, neither the exemption nor the preamble provide further definition of “one type of account to another”. However, there is guidance elsewhere that might be helpful.
It is important that financial institutions understand what account types are contemplated by the DOL’s exemption, since covered recommendations will be subject to the conditions of the exemption, including the requirement to provide the retirement investor, in writing, with the specific reasons why the rollover (e.g., change of account type) is in the retirement investor’s best interest.

Background

The DOL’s prohibited transaction exemption (PTE) 2020-02 (Improving Investment Advice for Workers & Retirees), allows investment advisers, broker-dealers, banks, and insurance companies (“financial institutions”), and their representatives (“investment professionals”), to receive conflicted compensation resulting from non-discretionary fiduciary investment advice to ERISA retirement plans, participants and IRA owners (“retirement investors”). In addition, in the preamble to the PTE the DOL announced an expanded definition of fiduciary advice, meaning that many more financial institutions and investment professionals will be fiduciaries for their recommendations to retirement investors and, therefore, will need the protection provided by the exemption.

Continue reading Best Interest Standard of Care for Advisors #72: Compliance with PTE 2020-02: Factors to Evaluate for Recommendations to Change Account Types (Part 7 on FAQ 15) →

Best Interest Standard of Care for Advisors #71: Compliance with PTE 2020-02: Further Extension of Non-Enforcement Policy

November 2, 2021
2020-02, best interest, broker-dealers, DOL, fiduciary, investment adviser, IRA, rollovers
financial institution, impartial conduct standards, investment professional, non-enforcement

This series focuses on the DOL’s new fiduciary “rule”, which was effective on February 16. This article looks at the Department of Labor’s recent extension of its non-enforcement policy regarding the conditions of Prohibited Transaction Exemption 2020-02….if the Impartial Conduct Standards are satisfied.

Key Takeaways

PTE 2020-02—sometimes referred to as fiduciary rule 3.0—was effective on February 16, 2021.
However, in the preamble to the PTE, the DOL extended its “non-enforcement policy” (Field Assistance Bulletin 2018-02) to December 20, 2021. That is, the DOL and IRS will not enforce the conditions of the exemption if financial institutions and investment professionals work “diligently and in good faith to comply with the Impartial Conduct Standards”.
In Field Assistance Bulletin (FAB) 2021-02, the DOL has extended the non-enforcement policy to January 31, 2022, and has extended, until June 30, 2022, its non-enforcement approach to the requirement to provide retirement investors with a written description of the “specific reasons” why a rollover recommendation is in the retirement investor’s best interest.
This article discusses the impact of the extension on (1) the conditions of PTE 2020-02, (2) the application of the expanded definition of fiduciary advice, including rollover recommendations, (3) the application to PTE 84-24 for insurance and annuity sales, and (4) the significance of the Impartial Conduct Standards in this context.

Background

Continue reading Best Interest Standard of Care for Advisors #71: Compliance with PTE 2020-02: Further Extension of Non-Enforcement Policy →

Best Interest Standard of Care for Advisors #70: Compliance with PTE 2020-02: Factors to Evaluate for an IRA-to-IRA Rollover Recommendation (Part 6 on FAQ 15)

October 18, 2021
2020-02, best interest, broker-dealers, DOL, fiduciary, investment adviser, IRA, rollovers
cost, FAQ, financial institution, investment professional, mitigation, services

The Department of Labor’s “Fiduciary Rule,” PTE 2020-02: The FAQs

This series focuses on the DOL’s new fiduciary “rule”, which was effective on February 16. This, and the next several, articles look at the Frequently Asked Questions (FAQs) issued by the DOL to explain the fiduciary definition and the exemption for conflicts of interest.

Key Takeaways

The DOL FAQs generally explain PTE 2020-02 and the expanded definition of fiduciary advice.
In FAQ 15, the DOL discusses the factors to be considered for a “rollover” recommendation. While most of the articles in this Best Interest series have focused on plan-to-IRA rollovers, the DOL’s definition of “rollover” includes a transfer—or rollover—from an IRA to another IRA. This article discusses IRA-to-IRA “rollover” recommendations.
The requirement that a rollover recommendation satisfy the best interest standard of care has applied since February 16. The DOL non-enforcement policy delays the enforcement of the conditions of PTE 2020-02, but does not delay the fiduciary definition.

Background

Continue reading Best Interest Standard of Care for Advisors #70: Compliance with PTE 2020-02: Factors to Evaluate for an IRA-to-IRA Rollover Recommendation (Part 6 on FAQ 15) →

Best Interest Standard of Care for Advisors #67: Compliance with PTE 2020-02: Factors to Evaluate for a Rollover Recommendation (Part 3)

September 21, 2021
2020-02, best interest, broker-dealers, DOL, fiduciary, investment adviser, IRA, registered investment advisers, rollovers
cost, factors, FAQ, financial institution, investment professional, investments, PTE, services

The DOL “Fiduciary Rule,” FAQ 15: Factors to Evaluate for a Rollover Recommendation (Part 3)

Key Takeaways

The DOL FAQs generally explain PTE 2020-02 and the expanded definition of fiduciary advice.
FAQ 15 explains the DOL’s opinion on the factors to be considered in the process of determining whether a rollover recommendation is in the best interest of a plan participant. In order to obtain relief from the prohibited transaction that results from a rollover recommendation where the financial institution and the investment professional are fiduciaries for the recommendation, the Impartial Conduct Standards must be satisfied during the period from February 16, 2021 until December 20, 2021 under the DOL’s non-enforcement policy (with concurrence by the IRS), and then on December 21, all of the conditions of PTE 2020-02 must be satisfied.
However, the requirement that a rollover recommendation satisfy the best interest standard of care is not delayed until December 21, since the Impartial Conduct Standards require that a financial institution and an investment professional satisfy the best interest standard of care. FAQ 15 explains the DOL’s view on what is required to do that.

Background

The DOL’s prohibited transaction exemption (PTE) 2020-02 (Improving Investment Advice for Workers & Retirees) allows investment advisers, broker-dealers, banks, and insurance companies (“financial institutions”), and their representatives (“investment professionals”), to receive conflicted compensation resulting from non-discretionary fiduciary investment advice to retirement plans, participants and IRA owners (“retirement investors”). In addition, in the preamble to the PTE the DOL announced an expanded definition of fiduciary advice, meaning that many more financial institutions and investment professionals will be fiduciaries for their recommendations to retirement investors and, therefore, will need the protection provided by the exemption.

In April, the DOL issued FAQs that explain the fiduciary interpretation and the conditions of the exemption.

Continue reading Best Interest Standard of Care for Advisors #67: Compliance with PTE 2020-02: Factors to Evaluate for a Rollover Recommendation (Part 3) →

Interest Standard of Care for Advisors #66: Compliance with PTE 2020-02: Factors to Evaluate for a Rollover Recommendation (Part 2)

September 15, 2021
2020-02, best interest, broker-dealers, DOL, fiduciary, investment adviser, rollovers
cost, factors, FAQ, financial institution, investment professional, investments, PTE, retirement investor, services

The DOL “Fiduciary Rule,” FAQ 15: Factors to Evaluate for a Rollover Recommendation (Part 2)

Key Takeaways

The DOL FAQs generally explain PTE 2020-02 and the expanded definition of fiduciary advice.
FAQ 15 explains the DOL’s opinion on the factors to be considered in the process of determining whether a rollover recommendation is in the best interest of a plan participant.
In order to obtain relief from the prohibited transaction that results from a rollover recommendation where the financial institution and the investment professional are fiduciaries for the recommendation, the Impartial Conduct Standards must be satisfied during the period from February 16, 2021 until December 20, 2021 under the DOL’s non-enforcement policy (with concurrence by the IRS), and then on December 21, all of the conditions of PTE 2020-02 must be satisfied.
However, the requirement that a rollover recommendation satisfy the best interest standard of care is not delayed until December 21, since the Impartial Conduct Standards require that a financial institution and an investment professional satisfy the best interest standard of care. FAQ 15 explains the DOL’s view on what is required to do that.

Background

In April, the DOL issued FAQs that explain the fiduciary interpretation and the conditions of the exemption.

Continue reading Interest Standard of Care for Advisors #66: Compliance with PTE 2020-02: Factors to Evaluate for a Rollover Recommendation (Part 2) →

Best Interest Standard of Care for Advisors #65: Compliance with PTE 2020-02: Factors to Evaluate for a Rollover Recommendation (Part 1)

September 7, 2021
2020-02, best interest, broker-dealers, DOL, fiduciary, investment adviser, rollovers
factors, FAQ, financial institution, investment professional, PTE, retirement investor

The DOL “Fiduciary Rule,” FAQ 15: Factors to Evaluate for a Rollover Recommendation

Key Takeaways

The DOL FAQs generally explain PTE 2020-02 and the expanded definition of fiduciary advice.
FAQ 15 explains the DOL’s opinion on the factors to be considered in the process of determining whether a rollover recommendation is in the best interest of a plan participant.
In order to obtain relied from the prohibited transactions that result from a rollover recommendation where the financial institution are fiduciaries for the recommendation, the Impartial Conduct Standards must be satisfied from February 16, 2021 until December 20, 2021 under the DOL’s non-enforcement policy (with concurrence by the IRS), and then on December 21, all of the conditions of PTE 2020-02 must be satisfied.
However, the requirement that a rollover recommendation satisfy the best interest standard of care is not delayed until December 21, since the Impartial Conduct Standards require that a financial institution and an investment professional satisfy the best interest standard of care. FAQ 15 explains the DOL’s view on what is required to do that.

Background

Continue reading Best Interest Standard of Care for Advisors #65: Compliance with PTE 2020-02: Factors to Evaluate for a Rollover Recommendation (Part 1) →

Best Interest Standard of Care for Advisors #64: Compliance with PTE 2020-02: Disclosure of Conflicts of Interest

September 1, 2021
2020-02, best interest, broker-dealers, DOL, fiduciary, investment adviser, prohibited transaction, rollovers
conflicts, disclosures, FAQ, financial institution, impartial conduct standards, investment professional, retirement investor

The DOL “Fiduciary Rule,” FAQ 14: Disclosure of Conflicts of Interest

Key Takeaways

The DOL FAQs generally explain PTE 2020-02 and the expanded definition of fiduciary advice.
FAQ 14 explains that, to obtain the relief provided by the PTE, financial institutions must disclose to “retirement investors” the conflicts of interest related to any recommendations.
The Impartial Conduct Standards, which do not require disclosure of conflicts, must be satisfied from February 16, 2021 until December 20, 2021 under the DOL’s non-enforcement policy (with concurrence by the IRS), and then on December 21, all of the conditions of PTE 2020-02 must be satisfied, including the disclosure of conflicts.

Background

In April, the DOL issued FAQs that explain the fiduciary interpretation and the conditions of the exemption.

Continue reading Best Interest Standard of Care for Advisors #64: Compliance with PTE 2020-02: Disclosure of Conflicts of Interest →

Best Interest Standard of Care for Advisors #63: Compliance with PTE 2020-02: Acknowledgement of Fiduciary Status

August 25, 2021
2020-02, best interest, broker-dealers, DOL, fiduciary, investment adviser, prohibited transaction, rollovers
FAQ, financial institution, impartial conduct standards, investment professional, PTE, retirement investor

The DOL “Fiduciary Rule,” FAQ 13: Written Acknowledgement of Fiduciary Status

Key Takeaways

The DOL FAQs generally explain PTE 2020-02 and the expanded definition of fiduciary advice.
FAQ 13 explains the DOL’s reasons for requiring that financial institutions and investment professionals provide retirement investors with a written acknowledgement of their status as fiduciaries for their recommendations.
The Impartial Conduct Standards, which do not require the declaration of fiduciary status, must be satisfied from February 16, 2021 until December 20, 2021 under the DOL’s non-enforcement policy (with concurrence by the IRS), and then on December 21, all of the conditions of PTE 2020-02 must be satisfied, including the fiduciary acknowledgement.

Background

In April, the DOL issued FAQs that explain the fiduciary interpretation and the conditions of the exemption.

Continue reading Best Interest Standard of Care for Advisors #63: Compliance with PTE 2020-02: Acknowledgement of Fiduciary Status →

Best Interest Standard of Care for Advisors #62: Compliance with PTE 2020-02: Conflicted Compensation

August 16, 2021
2020-02, best interest, broker-dealers, DOL, fiduciary, investment adviser, IRA, prohibited transaction, rollovers
compensation, FAQ, financial institutions, impartial conduct standards, investment professionals, PTE

The DOL “Fiduciary Rule,” FAQ 12: PTE 2020-02 and Conflicted Compensation

Key Takeaways

The DOL FAQs generally explain PTE 2020-02 and the expanded definition of fiduciary advice.
FAQ 12 explains that, if the conditions of the exemption are satisfied, financial institutions and investment professionals can receive conflicted compensation resulting from fiduciary recommendations to “retirement investors”, including IRA owners.
The Impartial Conduct Standards, must be satisfied from February 16, 2021 until December 20, 2021 under the DOL non-enforcement policy (with concurrence by the IRS), and then on December 21, all of the conditions of PTE 2020-02 must be satisfied.

Background

In April, the DOL issued FAQs that explain the fiduciary interpretation and the conditions of the exemption.

This article discusses FAQ 12—a DOL question and answer about the receipt of compensation resulting from recommendations to retirement investors.

Continue reading Best Interest Standard of Care for Advisors #62: Compliance with PTE 2020-02: Conflicted Compensation →

Best Interest Standard of Care for Advisors #61: Interim Compliance with PTE 2020-02: The Impartial Conduct Standards

August 10, 2021
2020-02, best interest, broker-dealers, DOL, fiduciary, investment adviser, IRA, prohibited transaction, rollovers
compensation, FAQ, financial institutions, impartial conduct standards, investment professionals, PTE

The DOL “Fiduciary Rule,” FAQ 11: The Impartial Conduct Standards

Key Takeaways

The DOL FAQs generally explain PTE 2020-02 and the expanded definition of fiduciary advice.
FAQ 11 discusses the Impartial Conduct Standards, which must be satisfied from February 16, 2021 until December 20, 2021 under the DOL non-enforcement policy (with concurrence by the IRS), and then on December 21, the Impartial Conduct Standards become one of the conditions of full compliance with PTE 2020-02.

Background

In April, the DOL issued FAQs that explain the fiduciary interpretation and the conditions of the exemption.

This article discusses FAQ 11—a DOL question and answer about the Impartial Conduct Standards. The Impartial Conduct Standards must be satisfied between February 16 and December 20 to obtain the relief afforded by the DOL’s non-enforcement policy. After December 20, the Impartial Conduct Standards must still be satisfied…as one of the conditions in PTE 2020-02.

Continue reading Best Interest Standard of Care for Advisors #61: Interim Compliance with PTE 2020-02: The Impartial Conduct Standards →