Skip to content

Broker-Dealer Regulation & Litigation Insights

  • About Us
  • Contributors
  • Resources
  • Presentations
  • Visit the Faegre Drinker website

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.

During the Department of Labor (DOL) fiduciary rule transition period, some compliance requirements – like required disclosures under the Best Interest Contract Exemption (BICE) – have been suspended.  On the other hand, the 408(b)(2) disclosure requirements still apply and require notice to a covered plan when there is a change in information previously disclosed … such as a broker-dealer’s change in status from non-fiduciary to fiduciary.  Since many broker-dealers are now considered fiduciaries (since the June 9 “applicability” date of the fiduciary rule), they should have issued a “change” notice within 60 days thereafter (i.e., by August 8) to meet the 408(b)(2) requirement.  (By the way, keep in mind that these requirements only apply to retirement plans and not to IRAs.)

Fortunately, the DOL has provided relief.  In August, the DOL issued “Conflict of Interest FAQs (408(b)(2) Disclosure Transition Period, Recommendations to Increase Contributions and Plan Participation).”  These FAQs provide relief from the 408(b)(2) requirement … up to a point.

There are two areas where relief is not provided:

  • If a broker-dealer was already a fiduciary but failed to give a 408(b)(2) notice disclosing that status, the FAQs don’t help. This was a violation then and continues to be one.
  • If the firm did give a 408(b)(2) notice but affirmatively stated that it wasn’t a fiduciary, that also isn’t covered and a change notice is required.

The relief does apply in the case of a broker-dealer that changed from a non-fiduciary to a fiduciary because of the new definition of fiduciary investment advice.  In that case, a change notice is not required if

“the covered service provider furnishes an accurate and complete description of the services that will be performed under the contract or arrangement with the plan, including the services that would make the covered service provider an investment fiduciary under the currently applicable Fiduciary Rule.”

The key is whether the broker-dealer’s services were sufficiently described for the client plan to conclude that the services constitute fiduciary advice.  This would be the case, for example, if the prior disclosure had said the broker-dealer would make recommendations about the selection and monitoring of the investments in a plan. Of course, this disclosure could have indicated that the firm was a fiduciary even under the old rules but, setting that aside, in our experience broker-dealers rarely describe their services that way.

This means that broker-dealers will need to issue a change notice that either (i) states they are a fiduciary or (ii) describes the firm’s services in sufficient detail for a client to conclude that they are one.  And this needs to be issued promptly; in the FAQs, the DOL said that these disclosures should be made “as soon as practicable after June 9, 2017, even if more than 60 days after June 9, 2017.”

The 408(b)(2) relief doesn’t last forever.  Even if a broker-dealer can avoid giving a change notice now, the relief only lasts until the applicability date of the final exemptions (that is, BICE, PTE 84-24 and the Principal Transactions Exemption).  At that time, the strict requirements of the 408(b)(2) regulation will apply. The DOL has proposed delaying final applicability to mid-2019, and a lot can change between then and now.  So even though there may be changes later on, for now the rules are clear, and broker-dealers need to comply with the DOL’s modified transition disclosure requirements.

The material contained in this communication is informational, general in nature and does not constitute legal advice. The material contained in this communication should not be relied upon or used without consulting a lawyer to consider your specific circumstances. This communication was published on the date specified and may not include any changes in the topics, laws, rules or regulations covered. Receipt of this communication does not establish an attorney-client relationship. In some jurisdictions, this communication may be considered attorney advertising.

Subscribe and Receive Alerts to New Articles

SUBSCRIBE
November 6, 2017
Written by: Fred Reish
Category: Fiduciary, SEC

Post navigation

Previous Previous post: Political Contribution Limitations Now Also Mandatory for Broker-Dealers
Next Next post: The SEC’s Back In the Fiduciary Regulation “Game”

Subscribe to Alerts

Recent Posts

  • New Year’s Priorities: FINRA Releases its 2023 Report on its Examination and Risk Monitoring Program
  • Managing IRAs: Charging Different Fees for Different Investments
  • FINRA Is Conducting a Targeted Exam of “Crypto Assets”
  • Recent State Fiduciary and Best Interest Developments
  • Rollover Recommendations – Do the SEC and DOL Requirements Align?

Categories

  • 12b-1 Fees
  • 3270
  • 3280
  • 3290
  • Anti-Money Laundering
  • Arbitration
  • BD
  • Best Execution
  • Best Interest Contract Exemption
  • Best Interest Standard of Care
  • Business Continuity Planning
  • Churning
  • Class Certification
  • Compensation Issues
  • Compliance
  • Concurrent jurisdiction
  • Conflicts of Interest
  • Congress
  • Covered class actions
  • Covered securities
  • Credit
  • Cryptocurrencies
  • Customer Due Diligence Rule
  • Customer Protection
  • Cybersecurity
  • Dark Pools
  • Data Integrity
  • DOL Fiduciary Rule
  • Elder Abuse
  • Enforcement
  • Event Study
  • Examination
  • Exchange-Traded Funds (“ETF”)
  • exemptions
  • Fair Pricing
  • Fees
  • Fiduciary
  • Fiduciary Duty
  • Financial Services
  • FinCEN
  • FINRA
  • FINRA 2018 Annual Regulatory and Examination Priorities Letter
  • FINRA 360
  • FINRA Code of Arbitration Procedure 12204
  • FINRA Code of Arbitration Procedure 13204
  • FINRA Notice 13-45
  • FINRA Regulatory Notice 16-25
  • FINRA Rule 12200
  • FINRA Rule 13200
  • FINRA Rule 2111
  • FINRA Rule 2165
  • FINRA Rule 2232
  • FINRA Rule 3310(c)
  • FINRA Rule 4210
  • FINRA Rule 4512
  • FINRA Summary Report
  • Fixed Income
  • Fraud
  • Goldman v. City of Reno, 747 F.3d 733(2014)
  • Goldman v. Golden Empire Schools Financing, 767 F.3d 210(2014)
  • IA
  • Impartial Conduct Standards
  • In the Matter of Merrill Lynch, Pierce, Fenner & Smith Incorporated, Respondent (AWC 2009020188101/January 25, 2012)
  • Initial Coin Offerings
  • Investment Recommendation
  • Investor
  • IRA
  • Liquidity
  • Manipulation
  • Margin
  • Market Access
  • Market Access Controls
  • Mortgage
  • Mutual Funds
  • New FINRA Rule
  • OCIE
  • Office of the Solicitor General
  • Options
  • Outside Activities
  • Outside Business Activities (“OBA”)
  • Policies and Procedures
  • Price Impact
  • Private Securities Transactions (“PST”)
  • Private Securities Transactions of an Associated Person”
  • Prohibited Transactions
  • Prudence
  • Quantitative Suitability
  • Reading Health v. JP Morgan, No. 16-4234 (3d Cir. Aug. 7, 2018)
  • Reasonable Fees
  • Recommendation
  • Regulation Best Interest
  • Regulation SHO
  • Regulatory Notice 18-13
  • Retirement Account
  • Risk
  • Rollovers
  • SEC
  • SEC 2018 National Exam Program Examination Priorities
  • SEC Reg BI
  • SEC RIA Interpretation
  • Securities Act of 1933
  • Securities Class Action
  • Securities Litigation Uniform Standards Act of 1998 (SLUSA)
  • Senior Safe Act
  • Seniors
  • Service Providers
  • Short Sales
  • Suitability
  • supervision
  • Supreme Court
  • Surveillance
  • Technology Governance
  • UBS v. Carilion Clinic, 706 F.3d 319(2013)
  • Uncategorized
  • Unit Investment Trusts (“UIT”)
  • Verification of Assets and Liabilities

archives

  • 2023
    • February 2023
    • January 2023
  • 2022
    • December 2022
    • November 2022
    • October 2022
    • September 2022
    • August 2022
    • July 2022
    • May 2022
    • April 2022
    • March 2022
    • February 2022
    • January 2022
  • 2021
    • December 2021
    • November 2021
    • October 2021
    • August 2021
    • July 2021
    • May 2021
    • April 2021
    • March 2021
    • February 2021
    • January 2021
  • 2020
    • December 2020
    • November 2020
    • October 2020
    • September 2020
    • August 2020
    • July 2020
    • June 2020
    • May 2020
    • April 2020
    • March 2020
    • February 2020
    • January 2020
  • 2019
    • December 2019
    • November 2019
    • October 2019
    • September 2019
    • August 2019
    • July 2019
    • June 2019
    • May 2019
    • April 2019
    • March 2019
    • February 2019
    • January 2019
  • 2018
    • December 2018
    • October 2018
    • September 2018
    • August 2018
    • July 2018
    • June 2018
    • May 2018
    • April 2018
    • March 2018
    • February 2018
    • January 2018
  • 2017
    • December 2017
    • November 2017
    • October 2017
  • About Us
  • Contributors
  • Resources
  • Presentations
  • Visit the Faegre Drinker website

© 2023 Faegre Drinker Biddle & Reath LLP. All Rights Reserved. Lawyer Advertising.
Privacy Policy

We use cookies to improve your experience with our website. By browsing our site, you are agreeing to the use of cookies. For more information about how we use cookies, please review our privacy policy and cookie policy. OK
Privacy & Cookies Policy

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Non-necessary
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.
SAVE & ACCEPT