Securities and Exchange Commission Chairman Jay Clayton warned advisors and broker-dealers in a late Monday statement on the pending June 30 compliance date for Regulation Best Interest and Form CRS that they must take special care when recommending 401(k)/IRA rollovers and withdrawals, complex or risky products as well as coronavirus-related investments and SPACs, or special purpose acquisition corporations.
The application of Reg BI to recommendations of rollovers of and withdrawals from retirement accounts is one of the rule’s “most significant enhancements over the status quo,” Clayton said, and these recommendations “should be approached with care.”
Broker-dealers and advisors should be “particularly attuned” to their regulatory obligations in light of the additional flexibility Congress recently provided investors to take withdrawals from certain accounts.
The Coronavirus Aid, Relief and Economic Security (CARES) Act allows eligible participants in certain tax-advantaged retirement plans to take early distributions of up to $100,000 during this calendar year without being subject to early withdrawal penalties and with an expanded window for paying the income tax they owe on the amounts they withdraw, he explained.
“By waiving early withdrawal penalties and other limitations tied to retirement accounts, Congress provided investors with substantial flexibility to access these plans in order to weather financial hardships related to the pandemic,” Clayton said.