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Category: Fiduciary

What Effect, if any, will the DOL Fiduciary Duty Rule have on FINRA Arbitrations?

Will FINRA claims change in the wake of the June 9, 2017 DOL Fiduciary Duty Rule (the New Rule)?

While it does not presently have all of the bells and whistles the securities industry has been bracing itself for, it nonetheless places brokers and their broker-dealer employers servicing regular brokerage IRAs in the role of a fiduciary for these accounts. This changes the rule of law in most jurisdictions which previously only held a broker/broker-dealer to a suitability standard unless there were special circumstances. See De Kwiatkowski v. Bear, Stearns & Co., Inc., 306 F.3d 1293, 1302 (2d. Cir. 2002).

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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.
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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.
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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.
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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.

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