SLOW Your Roll: DOL Temporarily Halts Enforcement of Compliance with PTE and ERISA Fiduciary Obligations for Rollover Advice

Benjamin Franklin once said “don’t put off until tomorrow what you can do today.” While that is always prudent advice, the Department of Labor (DOL) believes it’s best to grant an extension to investment advisors and broker-dealers to comply with the full terms of the Prohibited Transaction Exemption 2020-02 (PTE 2020-02), beyond the current December 21, 2021, deadline. A previous blog post covered the scope of the PTE and provided guidance on compliance.

In Field Assistance Bulletin 2021-02, the DOL announced that it would delay, until February 1, 2022, pursuing claims against “financial institutions”, including broker-dealers and investment advisers, “who are working diligently and in good faith to comply with the Impartial Conduct Standards” set forth in PTE 2020-02. The DOL also announced that it will not enforce the requirement that retirement investors be provided with the specific reasons why a rollover recommendation is in their best interest until July 1, 2022. (The DOL definition of “rollover” includes rolling over assets from 401(k) plans to individual retirement accounts and transfers of IRAs from other firms.) The DOL will begin enforcing all of PTE’s other requirements on February 1, 2022.

The DOL’s extensions come on the heels of financial institutions’ concerns that the December 20 deadline would be impractical because firms would (a) incur significant costs to distribute disclosures, (b) more efficiently perform the required annual retrospective reviews on a calendar-year basis, and (c) have significant challenges in implementing the rollover documentation and disclosure requirements in a sufficiently automated and systematic manner. The DOL took these concerns to heart and noted, “The Department understands that the December 20, 2021 expiration date of the current transitional relief poses practical difficulties for financial institutions.”

Advisers and broker-dealers will certainly appreciate the extensions. Nevertheless, our advice (in line with Mr. Franklin’s) remains: The time to act is now. PTE 2020-02’s requirements remain complex and burdensome and will involve considerable time and thought.

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About the Author: Sandra D. Grannum

Sandra Dawn Grannum concentrates her practice on securities, broker/dealer arbitration, litigation, mediation and regulatory defense. She is co-chair of the Commercial Litigation Team.

Sandy has tried complex multimillion-dollar arbitrations before FINRA, AAA and JAMS across the country. She has represented brokerage firms, banks, clearing firms, and associated persons in over 60 arbitrations before the NASD and FINRA which have been tried through award. In addition, she has successfully pursued cases in state and federal courts and in adversarial proceedings before bankruptcy courts.

About the Author: Jamie L. Helman

Jamie L. Helman concentrates her practice on securities, broker-dealer arbitration, litigation, mediation, employment matters, and regulatory defense. She has experience first-chairing FINRA arbitrations, defended on-the-record testimony of broker-dealer employees before FINRA, and is presently involved in the representation of broker-dealers in several pending FINRA cases as well as regulatory matters.

About the Author: Edward J. Scarillo

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