Los Angeles partner Fred Reish was quoted in the media regarding the Securities and Exchange Commission’s (SEC) release of a final package of regulations that will make the most significant changes to investment advice standards in more than two decades.
The SEC, after passing its advice standard package by a 3-1 vote, released the final rules for Regulation Best Interest, the Standard of Conduct for Investment Advisors, and Form CRS Relationship Summary/Amendments to Form ADV.
In a ThinkAdvisor article titled “Cheers, Jeers for SEC's New Advice-Standards Rules,” Fred stated that “it looks like the SEC has adopted strong rules for rollovers.”
The SEC “has expanded the rollover rules to include recommendations to defined benefit plans and profit sharing plans,” Fred said. “The proposed Reg BI applied to rollover recommendations that involved securities recommendations. A rollover recommendation to a 401(k) participant necessarily involved a securities transaction because the recommendation implicitly include the liquidation of the participant’s investments to that cash could be rolled over to an IRA.” The final rule “now refers to retirement plans more generally and no longer requires that the recommendation involves a securities transaction,” Fred said.
An Investment News article, titled “Brokers Face Heavy Lift to Implement Reg BI by Next Year,” notes that the clock is now ticking for brokers-dealers to modify their operations to comply with these new advice reform regulations by the implementation deadline of June 30, 2020. Fred commented that brokers will have to institute mitigation and best interest procedures for each of their lines of business — for instance, annuities, mutual fund portfolios and individual brokerage accounts.
"What are your practices going to be?" Fred said. "Then you develop policies, procedures, training and supervision around that. That's a lot to get done in 12 months, if you don't have a really strong corps of people in the home office."