More On Legal & Compliancefrom The Advisor's Professional Library
- The Few and the Proud: Chief Compliance Officers CCOs make significant contributions to success of an RIA, designing and implementing compliance programs that prevent, detect and correct securities law violations. When major compliance problems occur at firms, CCOs will likely receive regulatory consequences.
- Do’s and Don’ts of Advisory Contracts In preparation for a compliance exam, securities regulators typically will ask to see copies of an RIAs advisory agreements. An RIA must be able to produce requested contracts and the contracts must comply with applicable SEC or state rules.
The Department of Labor’s Employee Benefits Security Administration (EBSA) backed off on its controversial fiduciary requirements involving brokerage windows under its fee-disclosure rule 408(b)(2) that had the retirement planning community up in arms.
The industry had complained that the department had ushered in a new requirement on brokerage windows in its original Field Assistance Bulletin (FAB), but on Tuesday EBSA issued a revised Field Assistance Bulletin which is a turnaround from “its position in the old [FAB] under Q&A number 30 that plan fiduciaries have a duty to look at the investing patterns inside individual brokerage accounts and possibly designate some of the commonly held investments,” says Fred Reish, partner and chair of the Financial Services ERISA Team at Drinker Biddle & Reath in Los Angeles. “That is very good news and will be well received by the retirement and investment communities.”
Lynn Dudley, senior vice president of policy for the American Benefits Council (ABC), says the revised FAB “takes a much more practical approach.” The revised FAB “effectively eliminates” several significant fiduciary requirements that were not provided under current law but had been included under Question-and-Answer No. 30 of the FAB as originally drafted, she says, “including requirements that a plan must have ‘a manageable number of investment alternatives,’ monitor for ‘significant investment through a brokerage window’ and provide participant disclosures for any investment selected through a brokerage window by at least 1% of participants to qualify for the safe harbor test.”
But Reish (left) explains that DOL continues to assert that, “where a plan consists solely of brokerage accounts (i.e., each participant must invest through his or her brokerage account), the fiduciaries may have a duty under ERISA to provide a lineup of designated investment alternatives.”
He says that “there was some objection to that concept in the original Q&A 30 and it is included in virtually the same form in the new Q&A 39” under the revised FAB.
What’s more, Reish says, the DOL “continues to say that fiduciaries have a duty to prudently select and monitor the provider of brokerage accounts--in other words, the broker-dealer. That surprised some people, but it seems obvious to me that fiduciaries are responsible for all of a plan’s service providers, including broker dealers, and that job must be done in a prudent manner.”