Author:

Avatar

View the full bio for at the Drinker Biddle website.

Posts by :


SEC’s 2018 Exam Priorities – Worth the Wait

The SEC’s Office of Compliance Inspections and Examinations (OCIE) released its 2018 National Exam Program Examination Priorities on February 7, 2018 (“2018 Priorities Letter”). While issued later than in years past and almost a month to the day after the publication of the priorities letter from the Financial Industry Regulatory Authority (FINRA), OCIE deserves credit for the increased transparency and guidance provided in the 2018 Priorities Letter. By way of perspective, OCIE’s sixth publication of its examination priorities more than doubled the amount of information provided in last year’s edition. This improved transparency is consistent with the public statements of OCIE’s Director. Despite the greater detail, there appears to be one glaring omission: OCIE does not discuss how the anticipated rulemaking by the Commission regarding the development of a fiduciary standard may impact its priorities. However, upon further consideration and recalling that OCIE’s primary mission is to conduct examinations to assess compliance with the current securities laws, we realize it would have been premature for OCIE to discuss views on some yet-to-be formulated SEC fiduciary standard. That said, OCIE is clearly prioritizing the protection of retail investors even more than in years past, which is consistent with the SEC Chairman’s public statements about prioritizing the protection of “Main Street” investors. While the SEC Chairman has made these issues a “Main” priority, the SEC’s heightened focus regarding retail and retirement investors has been strengthening significantly since the Retirement-Targeted Industry Reviews and Examinations (ReTIRE) Initiative announced a few years ago and through the SEC’s announcement this past autumn of the Retail Strategy Task Force. Thus, OCIE leads into the 2018 Priorities Letter in the second and third sentences by opening with: “…we will continue to prioritize our commitment to protect retail investors, including seniors and those saving for retirement. We will especially be looking closely at products and services offered to retail investors, as well as the disclosures they receive about those investments.” This focus is similar to the focuses emphasized by FINRA in its recent priorities letter. Continue reading “SEC’s 2018 Exam Priorities – Worth the Wait”

Fiduciary Rule Myths

MYTH:  “Advisors must recommend the lowest cost investment.”

This post discusses what broker-dealers and their advisors need to do to manage the risks in providing investment recommendations to plans and IRAs. In order to manage those risks, though, broker-dealers and advisors need to understand what the rules require. To do that, we need to debunk some “myths” about the rules. Continue reading “Fiduciary Rule Myths”

The SEC’s Back In the Fiduciary Regulation “Game”

The SEC announced its plans to move “from the sideline” on fiduciary regulations on June 1, 2017.  That day, SEC Chairman Jay Clayton issued a statement referencing U.S. Department of Labor Secretary Alexander Acosta’s call for SEC participation and stated that he “look[ed] forward to robust, substantive input that will advance and inform the SEC’s assessment of possible future actions.” This represented the SEC’s first serious foray back into this area since a rule finalized in April 2005 entitled “Certain Broker-Dealers Deemed Not To Be Investment Advisers” that added Rule 202(a)(11)-1 to the Investment Advisers Act of 1940.  That rule was short-lived and was vacated by the U.S. Court of Appeals for the D.C. Circuit in 2007.
Continue reading “The SEC’s Back In the Fiduciary Regulation “Game””

Required Disclosures After the DOL Fiduciary Rule

You may have already missed a required deadline for disclosure to your retirement plan clients … or not.  In this post, we explore the requirement to update retirement plan disclosures to reflect changes in the information that was initially provided, including a change in fiduciary status under the new rules.
Continue reading “Required Disclosures After the DOL Fiduciary Rule”

The DOL’s Best Interest Contract Requirement: Effect on Litigation Against Broker-Dealers

The playing field for the financial services industry in general, and broker-dealers and brokers in particular, has changed during this past year.  On June 9, 2017, the Department of Labor (“DOL”) fiduciary advice standard, which is applied to all financial professionals advising retirement (plan and IRA) accounts, became applicable.  As a result, the standard of care required of broker-dealers providing advice to IRA investors has changed, at least in many cases.  This Article describes the effect on litigation against broker-dealers providing advice to IRA investors that would result if firms are required to enter into “Best Interest Contracts” with IRA investors, as the DOL’s Best Interest Contract Exemption currently requires.
Continue reading “The DOL’s Best Interest Contract Requirement: Effect on Litigation Against Broker-Dealers”

Fiduciary Rules for the Transfer of IRAs

When a financial advisor moves from one broker-dealer to another, both the firm and the advisor want his or her clients to come along.  When those clients have IRAs, any recommendations to the IRA investors are now subject to greater scrutiny.  This is because, under the DOL’s new fiduciary advice rule, a recommendation to move an IRA from another firm is a fiduciary recommendation.  And while this would ordinarily be a prohibited transaction under the Internal Revenue Code – because the broker-dealer and advisor will make money if the account is transferred but won’t if it isn’t – there is an exemption that permits the recommendation and any resulting compensation, if a number of conditions are satisfied.

Continue reading “Fiduciary Rules for the Transfer of IRAs”