S2:E11 | The New DOL Fiduciary Rule is Coming: Are You Ready? | Compliance In Context

Welcome back to the Compliance In Context Podcast! On today’s show, we welcome the Marcia Wagner, founder of The Wagner Law Group and an expert in all things ERISA to discuss the impact of the new DOL Fiduciary Rule on the investment management industry and the upcoming compliance and enforcement deadlines. In our Headlines section, we look at recently proposed amendments from the SEC to its electronic recordkeeping requirements and the new SEC enforcement report. And finally, we’ll wrap up today’s show with another installment of the Outtakes series where we once again learn the importance of being honest and transparent with investors when it comes to disclosures.

Headlines

• SEC recently proposed Amendments to its Electronic Recordkeeping Requirements

• SEC Division of Enforcement Publishes Annual Report for Fiscal Year 2020

Interview

• Who is an investment advice fiduciary?
• Why has the DOL’s interpretation of investment advice fiduciary caused controversy? What is the five-part test?
• What was the Deseret Letter?
• What is Prohibited Transaction Class Exemption 2020-02?
• Where does roboadvice fit under PTCE 2020-02?
• What types of transactions did the DOL treat as rollovers? What types of factors should be considered when recommending a rollover from a tax qualified plan to an IRA?
• What is the impartial conduct standard?
• What is the nonenforcement Policy of DOL and IRS with respect to PTCE 2020-02, and when is it scheduled to end?
• How will Prohibited Transaction 2020-02 be Enforced?

Outtakes

• SEC complaint against mutual fund executives that mislead investors by misrepresenting investment risks
• Funds suffered losses over $1 billion
• Be transparent with disclosures to investors

Quotes:

“The DOL treated five different types of transactions as rollovers, even though only some of them would constitute a rollover under the Internal Revenue Code.  These were plan-to-plan; plan to IRA; IRA to plan; IRA to IRA; and commission based account to fee based account.” – Marcia Wagner 

To satisfy PTCE 2020-02, financial institutions and investment professionals must acknowledge their fiduciary status in writing; disclose their services and material conflicts of interest; adhere to impartial conduct standards; adopt policies and procedures prudently designed to ensure compliance with the impartial conduct standards; document and disclose specific reasons why any rollover recommendations are in the participant’s best interest; and conduct an annual retrospective compliance review” – Marcia Wagner

“[I]in determining whether a retirement investor should rollover assets from a tax-qualified plan to an IRA, the financial institution or investment professional should take into account the retirement investor’s investment objectives, risk tolerance, financial circumstances and needs.  In addition, they should document the services available under the new arrangement; consider the long-term impact of any increased costs, determine why the rollover is appropriate notwithstanding any additional costs, and the impact of any economically significant investment features such as surrender schedules; index annuity caps, and participant rates.” – Marcia Wagner  

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