The DOL Fiduciary Rule: What You Need To Do By June 9th

Calendar, pen and notebook with blank pagesImportant elements of the new DOL Fiduciary Rule are scheduled take effect June 9, and the time is short to implement the new, expansive definition of fiduciary investment advice and the Impartial Conduct Standards. Among other things, this means that on June 9:

  • investment-related recommendations (including recommendations with respect to specific securities, insurance products, and asset management) will generally result in fiduciary status;
  • recommendations regarding rollovers will be fiduciary advice subject to the Rule; and
  • insurance professionals can continue to rely on PTE 84-24, as previously written, until January 1 for the recommendation and sale of fixed indexed, variable, and other annuity contracts to plans and IRAs, subject to the Impartial Conduct Standards.

While the Best Interest Contract (BIC) Exemption becomes available on June 9, only the Impartial Conduct Standards are required until January 1, 2018. During the transition period, when providing investment recommendations subject to the BIC Exemption, firms and their representatives must adhere to three Impartial Conduct Standards.  The three standards seem straightforward, but meeting them can be more involved then they might appear:

  1. Give advice that is in the retirement investor’s best interest. Firms will need to consider if they need more financial information from customers before making this determination.  Also, when recommending the rollover of retirement assets, firms will need to know about the plan from which those assets come.
  2. Earn no more than reasonable compensation (under the BIC Exemption). Each firm will make its own decision about the meaning of ‘reasonable compensation’ and the policies and procedures needed to satisfy this standard.  Meeting that standard should begin with determining what competitors charge for similar products and services and an analysis of what services you are charging for, be it on-going monitoring, social responsible investing, etc.
  3. Do not make materially misleading statements (which can include omissions) to the retirement investor. Under the Impartial Conduct Standard set forth in PTE 84-24, failing to disclose a material conflict of interest could be considered a misleading statement.

Compliance with these standards will require many firms to adopt or modify policies and procedures – possibly in significant ways. You should consider the extent to which policies, procedures, and record keeping may be needed to support compliance with the Impartial Conduct Standards.

The full conditions of the BIC Exemption become applicable on January 1, 2018. If you intend to rely on the BIC you will need to:

  • acknowledge fiduciary status
  • notify the DOL prior to receiving compensation in reliance on the exemption
  • provide contracts and disclosures for transactions with IRAs and ERISA plans
  • provide pre-transaction and website disclosures and
  • comply with the record keeping requirements.

As the various DOL Fiduciary Rule deadlines approach, assess your firm’s current business lines, investment offerings and compliance program, to determine what changes will have to be made and how to best implement and monitor those changes.  If your firm has limited capacity to manage the necessary assessments, implementation, and monitoring, Oyster can supplement your staff. We can help to manage and guide your project to successful completion.

Please join us for a 45-minute webinar on Wednesday, May 10th as our panelists discuss this and other questions firms have regarding:

 

What goes into effect in June:

  • What constitutes fiduciary advice
  • What you should know about the Impartial Conduct Standards
  • What exceptions to fiduciary status become applicable
  • What procedures and training do you need?

What firms must do before June 9th

Please send your questions, in advance, to Libby Hall at Oyster Consulting, libby.hall@oysterllc.com.

Register now for this webinar, to be held on Wednesday, May 10th at 3:00 pm EST. Questions from the audience are encouraged!

For more information about how Oyster Consulting can assist your firm with its regulatory compliance needs, complete our contact form or call us at 804.965.5400 and one of our Relationship Managers will be happy to help you.

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