Fred Reish

Fred Reish represents clients in fiduciary issues, prohibited transactions, tax-qualification and Department of Labor, Securities and Exchange Commission and FINRA examinations of retirement plans and IRA issues.

View the full bio for Fred Reish at the Faegre Drinker website.

Articles by Fred Reish:


FINRA’s Focus on Account Recommendations and Rollovers

FINRA’s continued focus on account recommendations and rollovers is evident in its 2025 FINRA Annual Regulatory Oversight Report (the Report),  Based on the Report, broker-dealers and their registered representatives (advisors) should ensure that account transfers and rollover recommendations are evaluated based on all relevant factors, that the recommendation aligns with the investor’s financial circumstances and investment objectives, and that the investor receives adequate disclosures.

In its Report, FINRA identifies a number of issues it has uncovered during its regulatory examinations that directly address account recommendations and rollover recommendations and sets forth effective practices to address these issues.  These issues and FINRA’s recommended effective practices are discussed below.

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The Best Interest Process for Plan-to-IRA Rollover

The effective date of the DOL’s new definition of fiduciary advice and the amendments to PTE 2020-02 have been stayed pending the outcome of the lawsuits challenging the rule and the amended PTE. However, there will still be instances when advisers will be considered fiduciaries under the current DOL fiduciary rule when recommending rollovers and as such, may need to comply with the current version of the PTE and undertake the best interest process described in this article. This article also describes the similarities in the best interest process required by the SEC for rollover recommendations.

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Rollover Recommendations: PTE 2020-02 Compliance Considerations Following the DOL Fiduciary Rule Stay

The effective date of the DOL’s new expansive fiduciary rule and the amendments to Prohibited Transaction Exemption (PTE) 2020-02 has been stayed pending the outcome of the lawsuits challenging the rule and the amended PTE.

However, broker-dealers and their registered representatives (advisors) may still be fiduciaries under the current DOL fiduciary rule when recommending rollovers and may need to comply with the current version of PTE 2020-02 to receive the management fee that results from the  rollover recommendation. This blog post describes circumstances when compliance with the PTE may be needed and the PTE conditions that apply now.

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New DOL Fiduciary Rule Stayed: What Advisors and Insurance Agents Recommending Rollovers Should Do Now

The stay of the new DOL fiduciary rule will remain in effect until the lawsuits challenging the rule are decided and appeals are resolved. This litigation process is likely to take several years. In the meantime, the fiduciary status of advisors and agents will be measured under the current regulation’s five-part test. However, in some cases the application of that test could result, as this article explains, in apparent one-time recommendations being deemed to satisfy the five-part test. As a result, advisors, agents and their firms should carefully consider where fiduciary status for retirement accounts may apply and, in those cases, should consider complying with the conditions of an applicable prohibited transaction exemption.

To view the full alert, visit the Faegre Drinker website.

The New Fiduciary Rule and Amended PTE 2020-02: Effective Date Considerations

The DOL’s new fiduciary advice rule, effective September 23, 2024, will cause many one-time recommendations to be fiduciary advice.  As a result, many more recommendations to retirement investors—private sector retirement plans, participants in those plans, and IRA owners—by broker-dealers and their representatives (advisors) will undoubtedly be fiduciary advice under the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code (the Code).

If the fiduciary advice results in compensation that the advisor would not have received absent the advice (for example, commissions or 12b-1 fees on IRA investment transactions or advisory fees from the IRA, in the case of a rollover), it is considered conflicted compensation prohibited under ERISA and the Code. As a result, many advisors will need the protection provided by Prohibited Transaction Exemption (PTE) 2020-02 in order to receive the conflicted compensation resulting from the fiduciary advice.

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Proposed Changes to PTE 2020-02 that Impact Broker-Dealers

The DOL has proposed amendments to its regulation defining fiduciary advice so that, in most cases, a single recommendation to a retirement investor will be a fiduciary act.  In addition, the DOL has proposed amendments to  Prohibited Transaction Exemption (PTE) 2020-02, which provides relief for prohibited conflicts of interest (e.g., commissions and fees). Both the amended regulation and the PTE could be finalized soon.  This post focuses on the proposed amendments that will impact broker-dealers and their registered representatives (investment professionals).

Background

The current and proposed PTE 2020-02 allow broker-dealers and investment professionals to receive conflicted compensation resulting from non-discretionary fiduciary investment advice to private sector tax-qualified and ERISA-governed retirement plans, participants in those plans, and IRA owners (collectively, “retirement investors.”).  The current version of the PTE is not available for investment advice generated solely by an interactive website based on personal information supplied by the investor on the website (i.e., robo-advice) where there is no personal interaction or advice with an investment professional.

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Compensation Requirements under Proposed Amendments to PTE 2020-02

Broker-dealers and their registered representatives (advisors) providing services to private sector tax-qualified and ERISA-governed retirement plans, participants in those plans and IRA owners (collectively, Retirement Investors) are subject to a number of compensation rules.

ERISA’s fiduciary responsibility rules mandate that ERISA plans pay no more than reasonable compensation to service providers (including advisors).

In addition, the prohibited transaction rules that apply to Retirement Investors set limitations on compensation. For example, if a service provider receives compensation in excess of a reasonable amount, the excess is a prohibited transaction for both the plan fiduciary and the service provider. It is also a prohibited transaction if an advisor receives compensation that varies based upon the recommendation made (i.e., variable compensation) or third-party compensation as a result of the recommendation, unless a prohibited transaction exemption applies. Lastly, some prohibited transaction exemptions – like Prohibited Transaction Exemption (PTE) 2020-02 – have other limitations on compensation. This post focuses on the compensation limitations in the DOL’s proposed amendments to PTE 2020-02.

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The Proposed DOL Fiduciary Rule: Significant Changes for Advisers

Benefits and executive compensation partner Fred Reish and counsel Joan Neri coauthored an article for IAA Today on the proposed fiduciary rule issued by the Department of Labor (DOL).

The authors highlight key provisions of the proposal and the amendments to prohibited transaction exemption (PTE) 2020-02 that will potentially impact investment advisers. They also note that the next step is for the DOL to receive comments on the proposed changes and develop a final regulation, and they reasonably expect final rules in mid-year 2024.

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The Best Interest Standard for Recommending Account Types

Under Regulation Best Interest (Reg BI), the SEC imposes a best interest standard on account recommendations by broker-dealers.  This is because recommending an account type is viewed by the SEC as recommending an investment strategy involving securities.  The SEC imposes a similar best interest standard on registered investment advisers under the SEC’s Interpretation Regarding Standard of Conduct for Investment Advisers (the RIA Interpretation).

The DOL also imposes a best interest standard under its prohibited transaction exemption (PTE) 2020-02 (Improving Investment Advice for Workers & Retirees) (the PTE), which allows broker-dealers and their registered representatives to receive conflicted compensation resulting from non-discretionary fiduciary investment advice about a change of account types for a retirement plan or an IRA.

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