The United States Department of Labor (“DoL”) indicated in a court filing yesterday, August 9, 2017, that it would be seeking an eighteen-month delay in implementing the second phase of the fiduciary rule. This phase, originally scheduled to go into effect on January 1, 2018, would require investment advisers who receive variable compensation to comply with the Best Interest Contract Exemption (“BICE”). A signature feature of the Fiduciary Rule, BICE permits investment advisers to receive variable compensation only if they sign a contract with clients promising to put the clients’ interest before their own. The second phase also implements exemptions for principal transactions and insurance agents.
Any implementation delays must be approved by the Office of Management and Budget (“OMB”). As of Wednesday, August 9, 2017, the OMB had not publicly acknowledged the delay proposal; it is expected that the OMB will note the proposal on its agenda shortly.
Opponents of the fiduciary rule say that an eighteen-month delay will give the DoL adequate time to perform a review of the rule as directed in President Trump’s February order. They argue that permitting the rule to go into effect during the pendency of the review creates instability and unnecessary uncertainty for consumers and the financial industry alike, and also prevents the DoL from collaborating with the Securities and Exchange Commission (“SEC”) on an industry-wide fiduciary standard. On the other hand, those who support the rule see the delay as an attempt to slowly neutralize it, where attempts to challenge the fiduciary rule in court have generally failed.
Regardless of whether phase two of the fiduciary rule is ultimately delayed, investment adviser firms must still move forward to ensure their compliance with aspects of the fiduciary rule, such as the impartial conduct standards, that are already in effect. Under that standard, investment advisers must give “prudent advice that is in the customer’s best interest, avoid misleading statements, and receive no more than reasonable compensation.” Click here to review the Best Interest Contract Exemption.
For our current clients, RIA Compliance Consultants is available for a consultation about what your investment advisor can do to prepare for the implementation of the DoL fiduciary rule. Please contact your compliance consultant.
In addition, RIA Compliance Consultants has a wealth of sample forms and sample written supervisory procedures you can customize to help your firm comply with the fiduciary rule, including the already implemented impartial conduct standard. Several of our forms are designed to help investment advisers memorialize the reasons, context, and communications underlying a particular recommendation by an investment adviser representative or particular choice made by a client – and thus, if necessary, can provide evidence that a recommendation was made in the client’s best interest.
Sample forms you may find helpful include:
- Client Meeting Notes & Checklist
- Broker Dealer (Commission) vs. RIA (Fee) Account – Client Acknowledgement
- Retirement Plan Rollover-Client Acknowledgement
- Recommending a Fixed-Indexed Annuity (FIA) in lieu of Separately Managed Account (SMA) in Retirement Account – Client Acknowledgment; and
- Risk Tolerance Questionnaire for Clients
Sample WSP’s you may find helpful:
- WSP/CoE Section Update – Assessing Suitability of Wrap-Fee/Fee-Based Accounts vs. Brokerage Accounts
- WSP/CoE Update Section – Account Type Suitability (Commission vs. Fee)
- WSP/CoE Update Section – IRA Rollover Recommendations
- WSP/CoE Update Section – Recommending Fixed Indexed Annuity in lieu of Separately Managed Account
- WSP/CoE Section Update – Inverse & Leveraged ETFs; and
- WSP/CoE Update Section – Different Fee Rates for Asset Classes in Retirement Accounts
If your investment adviser firm is subscribed to our Value, Bronze, Silver, Gold or Platinum packages, some or all of these samples are included with your package at no additional cost; you may access this sample form via your online subscription account here or by contacting your RCC compliance specialist or consultant. Alternatively, all of these sample forms can be purchased via our online store here. Sample WSP’s may be found in our online store by clicking here.
For prospective clients, RIA Compliance Consultant is able to include a consultation about the implementation of the DoL fiduciary rule as part of our annual compliance program service. New clients can click here to schedule an introductory call to learn more about our annual compliance program services.
Posted by RCC
Labels: Compliance Forms, DOL, Fiduciary, Written Policies and Procedures
