The issue of “best interest” continues to be a hot topic in the states and trade groups, though one state has fallen out of the running…at least for now.
The State of Massachusetts has two pending initiatives. The first is a regulation proposed by the state Securities Division requiring investment advisers to create a table of fees for their services. The comment period on the proposal ended in May, and we await further action. In a more recent development, the Division is considering a regulation that would apply a fiduciary standard on broker-dealers, investment advisers and their representatives. The proposal was released in mid-June, and the comment period ends on July 26. Under the proposal, enforcement would be vested in the Securities Division, and it would not create a private right of action.
Continue reading “Recent State Fiduciary Duty Developments: Updates from Massachusetts, New Jersey, Illinois and the CFP Board”
We have updated our State Fiduciary and Best Interest Developments chart to reflect regulatory changes in New Jersey. The New Jersey Bureau of Securities has proposed a rule that will establish a fiduciary standard for broker-dealers and clarify the standard applicable to investment advisors. The comment period on the proposal ends on June 14; we anticipate that the regulation will become effective later in 2019. (Details of the proposal may be found in the chart.) The proposal is part of New Jersey governor Murphy’s aim to provide strong consumer protections. That objective also led Gov. Murphy in the last few days to veto legislation that would have eliminated a fiduciary standard for insurance producers.
We are also delighted to announce the expansion of the Drinker Biddle Best Interest Compliance Team by the addition of a team of attorneys with experience in litigation involving retirement and health benefits, especially in defending class action lawsuits. The new members of the Team are: Kimberly A. Jones, James F. Jorden, Glenn Merten, Gregory Ossi, Waldemar J. Pflepsen, Jr. and Michael A. Valerio.
Please contact us if you have questions about state developments or other issues that affect your business.
We have updated our state fiduciary/best interest developments chart. We are still waiting for finalization of the Nevada rules on the fiduciary duty for broker-dealers and investment advisors and the effective date of the New York rules on the sale of annuities and life insurance. In the meantime, though, Maryland and Massachusetts have stepped in with new developments.
Continue reading “Updated State Fiduciary and Best Interest Developments Chart”
A number of states are seeking to impose fiduciary or best interest requirements on broker-dealers, investment advisers, financial planners and/or insurance brokers and producers in their dealings with customers. While the rules vary from state to state, they are in addition to – and sometimes inconsistent with – federal requirements being considered by the SEC or by the Department of Labor for retirement investment advice. We have prepared a chart summarizing the activities in each state along with proposals of the National Association of Insurance Commissioners (NAIC), which we update periodically as needed. You may access the chart here.
Nevada has released a proposed regulation to regulate broker-dealers and their advisors as fiduciaries. In 2017, the state amended its securities law to provide that broker-dealers and investment advisers owe a fiduciary duty to their customers, but the change didn’t provide details on what that meant. Instead, the legislation required that a regulation be issued to explain and implement the change. Nearly a year and a half later, a proposed regulation has been released.
Continue reading “Nevada Proposes Fiduciary Regulations”
Last month the SEC’s Office of Compliance Inspections and Examinations (OCIE) issued its “2019 Examination Priorities.” The release of OCIE’s 2019 Priorities this year was earlier than in years past. In retrospect, the date of issuance being the last day before the vast majority of the SEC staff was furloughed may just be coincidental, but the federal government shutdown allowed the industry more time to study OCIE’s 2019 Priorities for compliance planning for the upcoming year. Another impact of the shutdown and furloughs in an area directly related to OCIE’s first priority is that the SEC’s efforts and the timing of the finalization of the Reg BI proposals have very likely been slowed as well. The recent ending of the SEC furloughs and OCIE’s continuing prioritization of retail and retirement regulatory issues presents us with an opportune time to re-visit these important topics.
Continue reading “The Continuing Convergence of Retail and Retirement Regulatory Oversight”
In Parts 1 and 2 of this post, we talked about the current and proposed rules applicable to rollover recommendations by broker-dealers and RIAs. Part 1 discussed the DOL and FINRA rules that apply now. In Part 2, we explained the SEC proposals. In this post, we talk about how to make a compliant rollover recommendation, regardless of which set of rules applies.
(“Rollover recommendation” refers to advice to a retirement plan participant to take a distribution of his or her account and roll it over to an IRA that is being advised by the broker-dealer or RIA.)
Continue reading “Recommending Rollovers in the Evolving Regulatory Environment (Part 3)”
As discussed regularly on this blog, the financial industry has seen a stream of rules and regulations in recent years that relate to the standard of care and management of conflicts for broker-dealers, investment advisers, insurance agents and companies.
The need for experienced counsel to help navigate the evolving and overlapping federal and state “best interest” obligations has increased. It’s the reason we’re excited to announce the launch of our Best Interest Compliance Team.
This interdisciplinary group of more than 20 lawyers consists of attorneys with experience across Investment Management, ERISA, SEC & Regulatory Enforcement Defense, Litigation/FINRA Arbitration, and Insurance Regulatory and Transactional practice areas.
The Best Interest Compliance Team will help clients make decisions about questions such as:
- What does the SEC’s proposed Regulation Best Interest mean?
- How does the SEC’s RIA interpretive guidance impact the standards currently applied to RIAs?
- What is the effect of the court order vacating the DOL’s Fiduciary Rule and what already-implemented changes will continue under the SEC proposals for RIAs and broker-dealers?
- How should written supervisory procedures be revised in light of these changes and proposals?
- What measures should be taken to show good-faith compliance with the DOL’s non-enforcement policy?
- Where should broker-dealers/RIAs/insurance companies go from here?
- How should insurance agents deal with conflicting state regulatory schemes?
To learn more about the new Best Interest Compliance Team, read our press release or visit our team page on the Drinker Biddle website.
In our first post on this topic, we discussed the existing rules that apply to rollover recommendations by broker-dealers and RIAs. This discussion included the ERISA guidance that remains after the 5th Circuit’s decision vacating the Fiduciary Rule, as well as FINRA’s Regulatory Notice 13-45. In this post, we focus on the SEC’s best interest proposals for broker-dealers and RIAs and where that may take firms in the future. In our next, and final, post in this series, we’ll talk about how to make a compliant rollover recommendation.
(As a reminder, by “rollover” recommendation, we mean a recommendation to a retirement plan participant to take a distribution of his or her account and roll it over to an IRA being advised by the broker-dealer or RIA.)
Continue reading “Recommending Rollovers in the Evolving Regulatory Environment (Part 2)”
With recent developments in the regulatory landscape – the demise of the DOL Fiduciary Rule, the SEC’s proposed Regulation Best Interest (Reg BI) and RIA fiduciary interpretation, and the existing FINRA guidance on rollovers – it’s important for firms to understand the rules for rollover recommendations. This article discusses the rules as they apply to both broker-dealers and RIAs. While there are similarities in the application, there are also material differences. Continue reading “Recommending Rollovers in the Evolving Regulatory Environment (Part 1)”