More On Legal & Compliancefrom The Advisor's Professional Library
- The New and Improved Form ADV Whether an RIA is describing its investment strategy in advertisements or in the new Form ADV Part 2, it is important the firm articulates material risks faced by advisory clients and avoids language that might be construed as a guarantee.
- The Need for Thorough and Effective Policies and Procedures Whethere an advisor is SEC or state-registered, RIAs must revise their policies and procedures to address significant compliance problems occurring during the year, changes in business arrangements, and regulatory developments.
The rule is intended to assist fiduciaries in determining both the reasonableness of compensation paid to plan service providers and any conflicts of interest that may affect a service provider's performance under a service contract or arrangement.
According to a DOL statement announcing the disclosure requirement, the interim final rule applies to plan service providers that expect to receive $1,000 or more in compensation and that provide certain fiduciary or registered investment advisory services; make available plan investment options in connection with brokerage or recordkeeping services; or otherwise receive indirect compensation for providing certain services to the plan.
In the statement, Secretary of Labor Hilda Solis praised Capitol Hill legislators for their efforts to improve the current disclosure system. "The steps we are announcing today would not have been possible without the leadership and vision of House Education and Labor Committee Chairman George Miller and Senate Health, Education, Labor and Pensions Committee Chairman Tom Harkin. By highlighting the negative consequences that undisclosed fees can have for workers' retirement security, they made possible the type of dialogue between policymakers and the regulated community that has allowed for the development of meaningful regulatory standards on such a complex issue."
The interim final regulation will be published in the Federal Register on July 16. DOL is seeking public comments from interested persons on the regulation by August 30. The final regulation will be effective for contracts or arrangements between plans and service providers as of July 16, 2011.
Michael S. Fischer (firstname.lastname@example.org) is a New York-based financial writer and editor and a frequent contributor to WealthManagerWeb.com.