The Department of Labor is investigating broker-dealer and registered investment advisors’ services to ERISA retirement plans.
Fred Reish (left), partner and chair of the Financial Services ERISA Team at Drinker Biddle & Reath in Los Angeles, and two of his colleagues recently wrote an article in the law firm’s Investment Management Insight’s publication titled “DOL Investigations: Broker-Dealers and RIAs as Targets,” which reveals that in recent months the department has investigated eight BDs—three of which Reish’s firm has been involved in—as part of DOL’s Consultant/Adviser Project (CAP).
The CAP initiative, Reish says, is a national enforcement project designed to focus on “the receipt of improper or undisclosed compensation by employee benefit plan consultants and investment advisers.”
According to Reish, the CAP investigations “seek to determine whether the receipt of such compensation, even if it is disclosed, violates ERISA because the adviser/consultant used its position with a benefit plan to generate additional fees for itself or its affiliates…. The CAP will also seek to identify potential criminal violations, such as kickbacks or fraud.”
While Reish’s article states that there’s no official guidance on what triggers an investigation of any particular service provider, his firm has “informally heard that at least some investigations may be linked to referrals by securities regulators. This is consistent with the SEC’s statements and publications regarding pension consultants and conflict of interest concerns.”