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Fiduciary Status for the Unwary

If you thought that avoiding fiduciary status would be a slam-dunk after the “new” DOL fiduciary advice rule was vacated, think again. The DOL’s old fiduciary regulation is back and it casts an unexpectedly wide net.

Let’s start with the background. The reinstated fiduciary definition says that a broker-dealer and its advisor (a “broker”) are fiduciaries to a plan if a functional five-part test is satisfied: (1) the broker provides advice about investments for a fee or other compensation, (2) on a regular basis, (3) under a mutual understanding, (4) that the advice will form a primary basis for the plan’s decisions, and (5) that the advice is individualized based upon the plan’s particular needs. For this purpose, a “plan” includes not only an ERISA plan, but also an IRA. (In the context of IRAs, being a fiduciary under the five-part test does not itself implicate a standard of care, but does apply to the applicability of certain prohibited transactions.)

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Recommending Rollovers in the Evolving Regulatory Environment (Part 3)

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.)

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Recommending Rollovers in the Evolving Regulatory Environment (Part 2)

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.)
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Recommending Rollovers in the Evolving Regulatory Environment (Part 1)

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)”

SEC Open Meeting on Broker-Dealer and Investment Adviser Standards

On April 12, 2018, the Securities and Exchange Commission (SEC) announced an open meeting scheduled for April 18, 2018 at 3:30 p.m. (ET) to discuss standards applicable to broker-dealers and investment advisers in their dealings with retail investors. The subject matters scheduled to be covered are threefold:

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