The DOL’s new fiduciary “rule” became effective on February 16, 2021. The rule is a combination of a new and expansive definition of fiduciary advice (and status) and an exemption from the prohibitions of ERISA and the Internal Revenue Code for financial conflicts of interest arising from nondiscretionary fiduciary advice. These changes impact all investment advisers and broker-dealers who provide services to retirement plans, participants and IRA owners.
This article summarizes the new guidance, the requirements currently in effect, and the demanding additional requirements that must be satisfied beginning on December 21, 2021. And, beginning on December 21, the full terms of Prohibited Transaction Exemption (PTE) 2020-02 will apply, including the acknowledgement of fiduciary status, the conflicts and services disclosures and, for the types of rollovers discussed below, the written statement of the “specific reasons” the rollover recommendation is in the best interest of the participant or IRA owner.
Continue reading “The New DOL Fiduciary “Rule” For Investment Advisers and Broker-Dealers and the December 20 Deadline: The Time to Act is Now”
Ben Franklin once said “by failing to prepare, you prepare to fail.” Based on the SEC’s latest risk alert concerning broker-dealers’ anti-money laundering (AML) compliance (or lack thereof), some firms would be well served to heed Mr. Franklin’s advice.
The SEC specifically seeks to examine broker-dealers’ compliance with the various regulations and laws governing firms’ AML obligations. The risk alert highlights the SEC’s observations relating to firms’ deficiencies concerning (a) AML policies and procedures and internal controls; and (b) suspicious activity reporting (SAR). The SEC’s emphasis on AML should come as no surprise, as the SEC has previously included it as an exam priority. FINRA has additionally provided broker dealers with extensive AML guidance.
Continue reading “Risky Business: SEC Risk Alert Highlights Broker-Dealers’ Anti-Money Laundering Miscues and Encourages Firms to Beef Up Protection”
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.
Continue reading “Broker-Dealer Services to Plans and IRAs: Impact of the DOL Fiduciary Advice Exemption”