The Broker-Dealer Regulation & Litigation Digest is a periodic compilation of the most read blog posts published here during the last few months. Here you can catch up on what you missed or re-read these popular posts.
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The Broker-Dealer Regulation & Litigation Digest is a periodic compilation of the most read blog posts published on the Broker-Dealer Law Blog during the last few months. Here you can catch up on what you missed or re-read these popular post.
The Department of Labor (DOL) confirmed on February 12 that the Trump-era Prohibited Transaction Exemption 2020-02 (PTE) would go into effect as scheduled on February 16, 2021. The PTE will likely affect the business of broker-dealers that regularly make investment recommendations to IRA owners, as well as retirement plans and their participants (including rollover recommendations). This is due in part to the requirements of the PTE itself, but also because the rulemaking includes new interpretations that will expand the circumstances under which broker-dealers and their associated persons will be deemed to be advice fiduciaries. (The exemption refers to broker-dealers as “financial institutions” and their associated persons as “investment professionals” and this article uses those terms.)
As a result of these changes, broker-dealers need to re-evaluate whether and when they (and their investment professionals) may be fiduciaries, and where they are fiduciaries, they need to develop compliant practices, policies and procedures.
Late last year, House Ways and Means Committee Chairman Richard E. Neal (D-MA) and Ranking Member Kevin Brady (R-TX) introduced the Securing a Strong Retirement Act of 2020 (SECURE 2.0), a bipartisan legislative proposal that includes changes designed to encourage plan adoption, promote retirement savings, and fix certain plan administration problems.
As retirement income issues gain an expanding focus, we think it is important for broker-dealers, RIAs and their advisors to understand changes that could impact their clients. In this post, we comment on a number of the key provisions.
Continue reading “SECURE Act 2.0: Key Provisions Affecting Retirement Plans”
Welcome to the Broker-Dealer Regulation & Litigation Digest – a periodic compilation of the most popular blog posts from the Broker-Dealer Law Blog during the last few months. If you don’t already receive our posts, you can subscribe to the blog.
The CARES Act includes a provision that can help participants who are affected by the coronavirus (qualified individuals*) by permitting them to take a special coronavirus-related distribution (CRD) this year. As a financial professional who assists plans or plan participants, you should be aware of the rules applicable to CRDs so that you can be in a position to help your clients. That will include, for plans, whether and how to implement CRDs, and for participants, whether to take a CRD. Note: though we discuss this in the context of 401(k) plans, the CRD provision applies to all qualified plans, 403(b) plans and IRAs.
The following chart compares the CRD to other “distributable events.” Following the chart, we address issues that you may wish to discuss with your clients.
This post outlines CARES Act provisions that affect your plan sponsor clients, plan participants and IRA clients, so you can help them navigate the new rules. This post addresses the rules on required minimum distributions (RMDs). In future posts, we’ll discuss the special coronavirus-related distributions (CRDs) and the temporary loan enhancement rules.
Last month the SEC’s Office of Compliance Inspections and Examinations (OCIE) issued its “2019 Examination Priorities.” The release of OCIE’s 2019 Priorities this year was earlier than in years past. In retrospect, the date of issuance being the last day before the vast majority of the SEC staff was furloughed may just be coincidental, but the federal government shutdown allowed the industry more time to study OCIE’s 2019 Priorities for compliance planning for the upcoming year. Another impact of the shutdown and furloughs in an area directly related to OCIE’s first priority is that the SEC’s efforts and the timing of the finalization of the Reg BI proposals have very likely been slowed as well. The recent ending of the SEC furloughs and OCIE’s continuing prioritization of retail and retirement regulatory issues presents us with an opportune time to re-visit these important topics.
In a previous post, we discussed why broker-dealers and their representatives will likely still be fiduciaries to ERISA plans and IRA investors in many cases despite the DOL Fiduciary Rule’s impending death (we say “impending” because, while the Fifth Circuit’s ruling in mid-March vacates the Fiduciary Rule in its entirety, the court’s official order implementing this decision has yet to be issued). To review, this is because broker-dealers and their representatives often satisfy all the prongs of the soon-to-be reinstated 1975 fiduciary regulation’s “Five-Part Test” defining when investment recommendations rise to the level of “fiduciary” advice. Previous industry assumptions that brokers and other “sellers” of investments generally were not fiduciaries under the 1975 regulation should no longer be relied upon. In this post, we’ll examine how the Fiduciary Rule’s impending demise will affect prohibited transaction and compensation issues for broker-dealers in light of their likely continuing status as fiduciaries. Continue reading “Why Fiduciary Status Still Matters in a Post-Fiduciary Rule World: A Look at Prohibited Transactions And Compensation”
The “old” rules will again prevail—but the old rules will not be applied in the old ways, and this will have some significant impacts on broker-dealers.
As the DOL has not asked for a rehearing of the Fifth Circuit’s decision vacating the Fiduciary Rule, or yet sought to appeal the decision, it is widely anticipated that the March 15 ruling will soon take effect, restoring the DOL’s 1975 regulation defining fiduciary investment advice to plan and IRA investors (we say “widely anticipated” because, while the official mandate vacating the Fiduciary Rule is expected soon, it has been delayed while the court considers efforts from certain states and other third parties to intervene in the case). While the SEC has proposed new regulations for broker-dealers, and while we expect the DOL to propose new prohibited transaction exemptions or regulations that will coordinate with the SEC’s actions, it will be at least a year before these initiatives could begin to apply. Continue reading “Old Standard, New Day: The Death of the Fiduciary Rule Doesn’t Mean That Broker-Dealers Won’t be Fiduciaries”