Tag Archives: rollovers

Best Interest Standard of Care for Advisors #32


best interest, reg BI
, , , , ,

Regulation Best Interest: Best Interest and Suitability—How They Differ (Part 3)

Regulation Best Interest (Reg BI) imposes a “best interest” standard of care on broker-dealers for their recommendations of securities and investment strategies to retail customers. That raises the question, what does best interest mean and how does it differ from suitability?

(Note:  While the discussion in this article is based on Reg BI’s best interest requirements for broker-dealers, the SEC has also imposed a best interest standard on investment advisers. As a result, investment advisers should also be attentive to these issues.)

As I explained in Parts 1 and 2 of this article (Best Interest Standard of Care for Advisors #30 and #31), the difference between best interest and suitability is a hard question without an easy answer. However, based on the SEC’s discussion in the Adopting Release, I have developed examples of where best interest appears to impose a more demanding standard than suitability. These examples focus on the Reg BI requirement that broker-dealers (and their registered representatives) consider costs in the development of recommendations. While costs are not the only factor to be considered, the SEC says that the best interest rule makes cost a more important factor than it was under the suitability standard.

Continue reading Best Interest Standard of Care for Advisors #32 →

Share

Best Interest Standard of Care for Advisors #29


401(k), best interest, broker-dealers, IRA, reg BI, registered investment advisers
, ,

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 #20


broker-dealers, reg BI
, , , ,

Regulation Best Interest: Rollover Recommendations and Form CRS/ADV Part 3 Disclosures (Rollovers Part 6)

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 6th 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 five, see Best Interest for Advisors #’s 15, 16, 17, 18, and 19.)

This article continues the discussion of the disclosure requirements related to rollover recommendations by broker-dealers and investment advisers, but moves from the discussion in Best Interest for Advisors #19 about the disclosure requirements in Reg BI and the RIA Interpretation to the requirements in the new Form CRS Rule (which must be satisfied beginning June 30, 2020).

Continue reading Best Interest Standard of Care for Advisors #20 →

Share

Best Interest Standard of Care for Advisors #19


best interest, broker-dealers, SEC
, , ,

Regulation Best Interest: Rollover Recommendations for Investment Advisers (Rollovers Part 5)

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 5th of my series of articles about rollover recommendations and education under the SEC’s Regulation Best Interest and its Interpretation for Investment Advisers. (For the first four, see Best Interest for Advisors #’s 15, 16, 17 and 18.)

This article discusses the disclosure requirements for conflicts of interest involved in rollover recommendations by broker-dealers and investment advisers. Let’s start by pointing out why a rollover recommendation is a conflict of interest.

Continue reading Best Interest Standard of Care for Advisors #19 →

Share

Best Interest Standard of Care for Advisors #18


registered investment advisers, SEC
, , ,

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 #17


best interest, broker-dealers, SEC
, , ,

Regulation Best Interest: Education vs. Recommendation (Rollovers Part 3)

The SEC has issued its final Regulation Best Interest (Reg BI), Form CRS Regulation, 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 #16, I pointed out that, if a broker-dealer’s advisor recommended that a participant rollover his or her benefits in a workplace retirement plan to an IRA, it would be subject to the best interest standard of care (when Reg BI applies on June 30, 2020). (Best Interest for Advisors #15 discussed the process and factors to be considered to make a best interest rollover recommendation.)

My last post then went on to discuss rollover education and information . . . as opposed to a rollover recommendation. If properly done, the education and information approach can be used by broker-dealers if they are concerned about the difficulty of gathering the information for a rollover recommendation and the process for evaluating that information.

Continue reading Best Interest Standard of Care for Advisors #17 →

Share

Best Interest Standard of Care for Advisors #16


best interest, broker-dealers, SEC
, , ,

Regulation Best Interest: Education vs. Recommendation (Rollovers Part 2)

The SEC has issued its final Regulation Best Interest (Reg BI), Form CRS Regulation, 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 #15, I discussed the “best interest” standard for broker-dealers and their advisors and how it applies to rollover recommendations. (Keep in mind that Reg BI doesn’t apply until June 30, 2020.)

Until then the suitability standard applies and it only covers recommendations that involve securities transactions, for example, recommendations to rollover from a 401(k) plan, which requires that a participant liquidate the securities in his 401(k) account. When Reg BI applies, all rollover recommendations from all plans (e.g., including pension plans—where the participant doesn’t liquidate investments in order to rollover and non-ERISA plans, such as government plans).

Continue reading Best Interest Standard of Care for Advisors #16 →

Share

Best Interest Standard of Care for Advisors #15


401(k), best interest
,

Best Interest: Rollover Recommendations (Part I)

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 article discusses how the Care Obligation in Reg BI applies to recommendations to roll over accounts in 401(k) plans to IRAs. When Reg BI applies, beginning June 30, 2020, rollover recommendations to participants in “workplace retirement plans” will be subject to the Best Interest standard.

It’s important to note, though, that Reg BI still permits education and information that stops short of being a recommendation. However, the education and information cannot be a disguised recommendation.

Continue reading Best Interest Standard of Care for Advisors #15 →

Share