May 15, 2012

Bruce Ashton Quoted in the IA Week

Los Angeles partner Bruce Ashton was quoted in IA Week on the DOL’s new regulation under ERISA Section 408(b)(2), which takes effect July 1.

Rule 408 (b)(2) takes effect July 1 and requires service providers, such as RIAs servicing ERISA plans, to disclose their services, fiduciary status and direct and indirect compensation. There are, however, some areas of confusion – for example, with regard to soft dollars.

While the rule doesn’t define soft dollars, it require that soft dollar compensation be disclosed. Trying to place a dollar amount on the benefit, however, especially down to a specific ERISA plan, can prove difficult.

“They have to come up with some kind of value,” said Bruce. It’s “going to be hard” for advisers, he admitted.

The rule provides an option to express indirect compensation as a known range, which Bruce interpreted to mean not being outrageous and stating between zero and $1 million, but rather using “reasonable estimates.”

Bruce said it would be safer still to err on the side of a higher estimate rather than one that might miss the mark.

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