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COLLECTED WISDOM™ on the DOL and SEC Fiduciary Rules

This archive contains not only the most current material on the topic, but also older items that are still relevant, provide background, perspective or are germane to the topic.

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Other topical areas you may find of interest include Fiduciary Responsibility and Liability Issues and Fiduciary Related News and Intelligence.

Does the SEC Expect Investment Advisers to Make a Sweeping Compliance Upgrade?

The SEC's Final Interpretation Regarding Standard of Conduct for Investment Advisers "clarifies" the fiduciary duty of Investment Advisers in a succinct 42 pages. The Commission states that the Interpretation should affirm an IA's understanding of fiduciary duty, reduce uncertainty and facilitate compliance. Though REG BI may not apply to internal pension fiduciaries, it will apply to IAs handling 401k rollovers, not just with respect to investment advice, but also with respect to the advice to roll over the 401k.

Source: Cohenbuckmann.com, October 2019

Warren Labor Proposal Targets ERISA Preemption, Fiduciary Rulemaking

The presidential candidate released a 14-page proposal on Oct. 3, "Empowering American Workers and Raising Wages," that essentially calls for restoring worker protections and labor union rights by "returning power to working people." The proposal singles out the Department of Labor's conflict-of-interest rule that was vacated last year by the 5th U.S. Circuit Court of Appeals.

Source: Asppa.org, October 2019

A New Direction for DOL Fiduciary Rulemaking

As early as this fall, we may see the DOL issue new guidance on rollovers (a significant and uncertain issue in the wake of the Fiduciary Rule's demise) and, in all likelihood, a proposed class exemption applicable to broker-dealers, which, at its heart, could condition relief on adherence to new Regulation Best Interest. It is not anticipated that the DOL will reformulate the ways in which one becomes an investment advice fiduciary under ERISA.

Source: Fiduciarygovernanceblog.com, September 2019

Second Lawsuit Filed Against SEC Advice Rule

On September 11, 2019, XY Planning Network filed a lawsuit against the United States Securities and Exchange Commission to invalidate its new fiduciary standards, known as the Regulation Best Interest Rule. The plaintiffs argue that the regulation fails to meet standards imposed under the Investment Advisers Act of 1940, and frustrates the intent of the Dodd-Frank Act.

Source: Ascensus.com, September 2019

The DOL's New Fiduciary Rule: What Are Some Likely Outcomes?

The Department of Labor is set to finalize its new fiduciary rule by the end of 2019. The rule covers those giving advice regarding retirement accounts regulated by ERISA. At this point, we have little information on what the rule is likely to look like, but there are some clues in place.

Source: Hallbenefitslaw.com, September 2019

How Reg BI Changes the Fiduciary Landscape for the 401k Plan Sponsor

Over the summer, the SEC finalized Regulation Best Interest. It becomes effective this week. In a June 5, 2019 SEC Press Release, issued by the SEC, Jay Clayton, SEC Chairman, stated, "This rulemaking package will bring the legal requirements and mandated disclosures for broker-dealers and investment advisers in line with reasonable investor expectations, while simultaneously preserving retail investors' access to a range of products and services at a reasonable cost." Although it has received mixed reviews, it is clear Reg BI will impact investors, the industry, and, although many might not expect it, retirement plan sponsors.

Source: Fiduciarynews.com, September 2019

Seven States and D.C. Aggressively Challenge Reg BI

On September 9, 2019, the states of New York, California, Connecticut, Delaware, Maine, New Mexico and Oregon, and the District of Columbia filed a complaint for declaratory and injunctive relief against the SEC challenging Reg BI. Based on their public complaints since the proposed releases, some expected certain investor advocacy groups to attempt to take the lead in challenging this rulemaking effort by the SEC. Ultimately, the States have elected to the lead the charge.

Source: Brokerdealerlawblog.com, September 2019

The Emerging Best Interest and Fiduciary Duty Patchwork

This year has seen a number of fiduciary and best interest investment advice regulations at both the federal and state levels. Firms subject to these regulations will face challenges in dealing with rules that will impose a host of new obligations, and that may overlap and conflict with one another. This chart is intended to help firms take stock of the evolving framework and aid firms in putting the pieces together.

Source: Eversheds-Sutherland.com, August 2019

Congress Members Ask GAO to Study Fallout From Death of DOL Fiduciary Rule

High-level Democrats in the Senate and House of Representatives have asked a congressional watchdog to study the fallout from the now-defunct Department of Labor fiduciary rule, including the regulation's effect on a wide range of business practices and how those practices have changed since the rule was killed in court.

Source: Investmentnews.com (registration may be required), June 2019

SEC's New Broker Rule: Issues for Plan Fiduciaries

This article considers how the SEC's new, detailed, and significantly higher standard of conduct rules for brokers may affect plan sponsor fiduciaries. In light of the new (and significantly elevated and detailed) broker standard of conduct rules, the application of the plan fiduciary's duty to monitor "whether the adviser continues to meet applicable federal and state securities law requirements" deserves special attention.

Source: Octoberthree.com, June 2019

What the New DOL Fiduciary Rule Will Probably Look Like

The form and substance of the Department of Labor's new fiduciary rule, set to be unveiled by the end of the year, is anybody's guess. But there are a few clues, and attorneys who specialize in fiduciary and retirement law have mined them to offer some likely scenarios.

Source: Investmentnews.com (registration may be required), June 2019

DOL Sets Date to Propose New Fiduciary Rule

The Department of Labor will propose a new fiduciary rule in December, the opening salvo in what will likely prove to be another contentious battle to overhaul investment advice standards in retirement accounts.

Source: Investmentnews.com (registration may be required), May 2019

The Emerging Best Interest and Fiduciary Duty Patchwork

By all accounts, 2019 will see the advancement of a number of fiduciary and best interest investment advice regulations at both the federal and state levels. Firms subject to these regulations will face challenges in dealing with rules that will impose a host of new obligations, and that may overlap and conflict with one another. This 6-page chart is intended to help firms take stock of the evolving framework and aid firms in putting the pieces together.

Source: Sutherland.com, May 2019

DOL to Issue New Rules on Fiduciary Duties: Acosta

Labor Secretary Alexander Acosta signaled that the Labor Department will issue new fiduciary-related rules. In an exchange during an oversight hearing held by the House Education and Labor Committee, Rep. Marcia Fudge questioned Acosta on Labor's fiduciary plans. Acosta said that Labor is collaborating with the Securities and Exchange Commission as it works on its advice-standards package, which includes Regulation Best Interest, and that "based on our collaborative work, we will be issuing new rules in this area."

Source: Thinkadvisor.com, May 2019

DOL's Fiduciary Theory: Fundamentally Incoherent

Michael Barry, president of O3 Plan Advisory Services LLC, discusses the inconsistencies in the Department of Labor's theory of retirement plan sponsor fiduciary responsibility, especially with respect to participant choice, and the consequences of its failure to provide clear guidance.

Source: Plansponsor.com, May 2019

Fiduciary Rule Remnants: The Strange Case of Field Assistance Bulletin 2018-02

Although DOL and the IRS will not bring enforcement actions against fiduciaries working diligently and in good faith to comply with the impartial conduct standards, FAB 2018-02 does not address the rights or obligations of other parties. It is possible that participants in plans subject to ERISA, along with plan fiduciaries, may be able to bring claims against a fiduciary that is engaging in transactions without an applicable exemption.

Source: Klgates.com, May 2019

Updated State Fiduciary and Best Interest Developments Chart

Drinker Biddle & Reath has updated their state fiduciary/best interest developments chart. They note that they are still waiting for finalization of the Nevada rules on the fiduciary duty for broker-dealers and investment advisors and the effective date of the New York rules on the sale of annuities and life insurance. In the meantime, though, Maryland and Massachusetts have stepped in with new developments.

Source: Brokerdealerlawblog.com, April 2019

The DOL's Temporary Enforcement Policy: Potential Traps for the Unwary

For advisors who are fiduciaries, the loss of the BIC Exemption -- which permitted the receipt of "conflicted compensation" when an advisor satisfied best interest and disclosure requirements -- is problematic. Fortunately, the DOL recognized that problem and provided relief in Field Assistance Bulletin 2018-02. While this relief is significant, it is not without limitations.

Source: Brokerdealerlawblog.com, April 2019

Not Quite Gone, Far From Forgotten: The Current Status of the DOL Fiduciary Rule

In June 2018, the US Court of Appeals for the Fifth Circuit officially ordered the DOL to vacate the so-called DOL Fiduciary Rule and its related exemptions. As a result of this order and the DO's decision not to appeal, the DOL Fiduciary Rule is regarded as effectively repealed, leaving just the formality of removing it from the Code of Federal Regulations. But the rule continues to influence developments not only in the retirement area, but also beyond.

Source: Morganlewis.com, April 2019

Seven States With Major 401k Fiduciary Proposals

If you need a convenient, "all-in-one-place" overview of what's happening at the state level, Drinker Biddle's got it. The Best Interest Compliance Team at the legal powerhouse put together the following list of bills, proposals, regs and requirements now put forth involving fiduciary and related matters.

Source: 401kspecialistmag.com, March 2019

State Fiduciary and Best Interest Developments

A number of states are seeking to impose fiduciary or best interest requirements on broker-dealers, investment advisers, financial planners and/or insurance brokers and producers in their dealings with customers. While the rules vary from state to state, they are in addition to -- and sometimes inconsistent with -- federal requirements being considered by the SEC or by the Department of Labor for retirement investment advice. This chart summarizes the activities in each state.

Source: Brokerdealerlawblog.com, March 2019

Fred Reish: Novel Compliance Approach to 401k Fiduciary Standard

This article discusses a novel approach for compliance with the fiduciary standard for the selection of investments for 401k plans. All the more interesting, the approach was part of an opinion of the U.S. First Circuit Court of Appeals.

Source: 401kspecialistmag.com, February 2019

Nevada Proposes Sweeping Fiduciary Regulation

On January 18, the Nevada Securities Division released its long-awaited proposed draft regulation. Under the proposed regulation, a broker-dealer and sales representative are presumed to owe a fiduciary duty to the client.

Source: Fiduciarygovernanceblog.com, January 2019

Advice Standards Packages From the SEC and DOL Expected by September 2019

The Securities and Exchange Commission's advice standards package and the Labor Department's revised fiduciary rule are both expected to be finalized by September 2019, ThinkAdvisor writes. As part of the SEC package, there will be changes to Regulation Best Interest and the Customer Relationship Summary, according to SEC Chairman Jay Clayton, the publication writes.

Source: Thewealthadvisor.com, December 2018

How the DOL Fiduciary Rule Proposal Affected Fund Flows

When the Labor Department proposed its fiduciary rule in 2015, its key objective was to reduce the effect of conflicts of interest on the advice investors rely on to save for retirement. When we examine the data, we see that the DOL fiduciary rule proposal was successful in mitigating lower returns resulting from conflicted advice in the two years after the rule was proposed. Now as the Labor Department rule has been struck down by the courts, the question is, will the SEC turn its Regulation Best Interest proposal into a workable regulation that maintains these positive trends for investors?

Source: Morningstar.com, December 2018

SEC Investor Advisory Committee Calls for Stronger Best Interest Regulations

The committee says the SEC should explicitly explain that Regulation Best Interest is a fiduciary duty shared equally by advisers and broker/dealer to act in their customers' best interest.

Source: Planadviser.com, November 2018

Broker-Dealers as Fiduciaries After the DOL Rule Vacatur

The purpose of this 14-page article is to explain a broker-dealer's obligation when it provides recommendations to accounts subject to ERISA and the Code post-vacatur. Additionally, it looks at where broker-dealer activities may be headed considering the SEC's proposed Regulation Best Interest and compare that to what is required under ERISA and the Code. Many broker-dealers, particularly if they provide investment advice, will find complying with an SEC "best interest" standard and the fiduciary and prohibited transactions of ERISA and the Code quite challenging.

Source: Groom.com, October 2018

DOL to Introduce New Fiduciary Rule

The never-ending story of the Department of Labor's efforts to implement and enforce a fiduciary rule could soon roar back to life, with the DOL signaling September 2019 as the target. Appearing on the Office of Information and Regulatory Affairs website, the department says it's considering regulatory options in light of the Fifth Circuit opinion, which vacated the DOL's new regulatory definition of a fiduciary.

Source: 401kspecialistmag.com, October 2018

DOL Likely to Address Fiduciary Rule Again Next Year

The agency released a regulatory agenda on Thursday that indicates that it will consider "regulatory options" to respond to the U.S. Fifth Circuit Court of Appeals decision in March to vacate the rule, which would have required brokers in retirement accounts to act in the best interests of their clients. The deadline for a proposal is September 2019.

Source: Investmentnews.com (registration may be required), October 2018

Standards of Conduct for Investment Professionals - Overlapping Protections for Broker-Dealer Retirement Customers

The legal standards for broker-dealer firms and their representatives, particularly in the retirement market, continue to be in flux. BDs were among those most affected by the promulgation in 2016 of the DOL fiduciary rule under ERISA, which undertook to switch their legal status in the retirement market from securities selling firms to unconflicted fiduciary advisers. Thus, BDs are among those most affected by the vacatur of that rule. With the SEC "best interest" standard of care proposal, however, the regulatory environment continues to evolve. Article looks at the overlapping layers of regulation to which BDs could be subject in the retirement market.

Source: Eversheds-sutherland.com, October 2018

Why the SEC Will Never Enact a Meaningful Fiduciary Standard

The author writes in this opinion piece, "I continue to enjoy reading analyses on the SEC's BI proposal. These are analyses from industry leaders, people who I greatly admire and respect. When people ask my opinion, I just tell them it is all just a cruel game, that the SEC has never intended to protect the public with a meaningful universal fiduciary standard, that the SEC will never do so, as it would jeopardize their own careers and risk incurring the wrath of Wall Street."

Source: Iainsight.wordpress.com, October 2018

Understanding the Unwinding of DOL's Fiduciary Rule

This 14-page article discusses the implications of the Fifth Circuit's vacatur of the U.S. Department of Labor's fiduciary rule, best interest contract and principal transactions exemptions, and related amendments to other prohibited transaction exemptions, or PTEs, in Chamber of Commerce of the United States v. United States Department of Labor.

Source: Groom.com, September 2018

DOL Fiduciary Rule Post-Mortem: How Long Will the Taste Linger?

The DOL's Fiduciary Rule has been vacated. In its stead we now have the SEC's "Best Interest" proposal. This is the first in a three-part series that will reflect on the past, present, and future of the fiduciary standard.

Source: Fiduciarynews.com, August 2018

Why You Should Still Take the Fiduciary High Ground on 401k Rollovers

The Fifth Circuit Court of Appeals issued its mandate to vacate the Department of Labor fiduciary rule in June, but guidance issued by the DOL the month prior allows at least part of the rule to continue to apply. This anomaly has some profound ramifications for retirement advisers dispensing rollover advice.

Source: Investmentnews.com (registration may be required), August 2018

SEC Best Interest Proposals: What They Mean for Investment Advisors

This 16-page paper focuses on the RIA Interpretation and its impact on investment advisors. In addition, it briefly discusses the proposed Form CRS relationship summaries and highlights some of the provisions that impact RIAs.

Source: Tdainstitutional.com, August 2018

Groups Say SEC's Best Interest Proposal Fails to Provide Uniform Fiduciary Standard

Comments on the SEC's proposed best interest standards express concern that the standards fail to impose a uniform fiduciary standard or define key terms, most notably, what is a "best interest" standard.

Source: Planadviser.com, August 2018

DOL Fiduciary Rule Can Cause Litigation Risk From Beyond the Grave

Although the Labor Department's fiduciary rule died in court in June, it can still cause litigation risk for firms that changed their policies to comply with the measure. If you adopted policies and procedures, you need to make sure you're following them, or, if you decide it is appropriate, change them back.

Source: Investmentnews.com (registration may be required), July 2018

States Start Knitting a Patchwork of Best Interest Fiduciary Regulations

With the judicial defeat of the Obama-era DOL fiduciary rule hanging in the air, individual states are moving to establish their own best interest regulations for the sale and service of investment products; attorneys warn that more piecemeal regulation is likely, as are lawsuits to test some complex ERISA preemption issues.

Source: Planadviser.com, July 2018

How the DOL Fiduciary Rule Changed Norms

The Department of Labor fiduciary rule might be history, but many financial professionals will continue to feel the effects of its rules for some time to come. They will feel that impact in two ways: from the changing norms fueled by the three-year interaction with the DOL rule; and from lingering department guidance that lives on.

Source: Insurancenewsnet.com, July 2018

State Enforcement Remains Risk in Wake of DOL Fiduciary Rule Sunset

Massachusetts Securities Regulator Galvin wants the SEC "to re-draft its Regulation Best Interest for brokers and mandate a true fiduciary standard that investors deserve."

Source: Fiduciarygovernanceblog.com, June 2018

DOL Fiduciary Rule is Officially Vacated, Focus Shifts to SEC

After nearly a decade in the making, the Department of Labor's fiduciary rule appears to be officially dead. Meanwhile, the SEC published proposed conflict of interest rules for broker-dealers and investment advisers.

Source: Erisapracticecenter.com, June 2018

The End of the DOL's Fiduciary Rule

On June 21, 2018, the Fifth Circuit Court of Appeals issued a mandate vacating the controversial fiduciary rule issued by the U.S. Department of Labor in 2016. The mandate follows the court's opinion issued on March 15, 2018, which invalidated the rule. As a result of the mandate, the fiduciary rule is no longer effective nationwide.

Source: Bradley.com, June 2018

Lessons 401k Advisers Learned From the DOL Fiduciary Rule Saga

Retirement plan advisers, especially specialists, used to complain that their broker-dealers and the public ignored them, or, worse, didn't realize they existed. All that has changed now that retirement has become a key political issue and retirement advisers have a target on their backs.

Source: Investmentnews.com (registration may be required), June 2018

Fifth Circuit Issues Mandate Vacating Fiduciary Rule

On June 21, 2018, the United States Court of Appeals for the Fifth Circuit issued its mandate officially vacating in toto the DOL's 2016 Fiduciary Rule, including the Best Interest Contract, and the DOL's other related 2016 prohibited transaction exemptions. The mandate is the final step following the Fifth Circuit's March 15, 2018 judgement in U.S. Chamber of Commerce v. DOL, where the court held that the Fiduciary Rule was invalidly promulgated.

Source: Groom.com, June 2018

Why Fiduciary Status Still Matters in a Post-Fiduciary Rule World

Previous industry assumptions that brokers and other "sellers" of investments generally were not fiduciaries under the 1975 regulation should no longer be relied upon. This article examines 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.

Source: Brokerdealerlawblog.com, June 2018

SEC Best-Interest Proposal Doesn't Affect 401k Brokers

While the SEC has proposed to impose a limited, or transaction-based, best-interest standard on broker-dealers, that only applies to investment recommendations made to "retail customers." Based on the SEC's definitions, it does not appear that, for the court, retirement plans are retail customers. As a result, broker-dealer investment recommendations to retirement plans would not be covered by the best-interest standard.

Source: Investmentnews.com (registration may be required), June 2018

It's Official: U.S. Rule to Protect Retirement Savers Is Dead

The last deadline for resuscitating the fiduciary rule passed when the government declined to ask the U.S. Supreme court to reconsider the appeals court’s decision. The prospect of holding advisers accountable to retirement savers hasn't disappeared entirely, though. The SEC is considering its own version of the fiduciary rule, known as the best-interest rule.

Source: Bloomberg.com, June 2018

Plaintiffs Press for Fiduciary Rule 'Closure'

The victorious plaintiffs in litigation vacating the Labor Department's fiduciary rule would like the U.S. Court of Appeals for the 5th Circuit to put the rule -- and the financial services industry at large -- out of its collective "misery."

Source: Asppa.org, June 2018

SEC's Regulation Best Interest Falls Short of Making Broker-dealers Fiduciaries

The big takeaway is that the proposed SEC rules probably don't apply to advice given to retirement plan sponsors but would apply to advice given to participants in a workplace plan, especially as it pertains to rolling over their retirement accounts into an individual retirement account.

Source: Benefitnews.com, June 2018

The Legacy of the DOL Fiduciary Rule

Even as the DOL's? fiduciary rule teeters on the edge of demise, its legacy will continue to profoundly influence how advice is delivered. Having caused significant shifts among advisers, firms and consumers, can the push for a higher investment-advice standard really be erased by one court's decision?

Source: Investmentnews.com (registration may be required), June 2018


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