Drinker Biddle partner Fred Reish spoke with Ignites, a publication focused on the mutual fund industry, regarding the Security and Exchange Commission’s new Regulation Best Interest, which takes effect in less than a year and has retirement plan recordkeepers carefully reviewing its 800 pages.
In “401(k) Providers Begin Reg BI Prep, Slowly,” Ignites reports that a forthcoming Department of Labor rule on the subject, scheduled for a December release, has created uncertainty in the industry with providers concerned about potential differences and companies having little room to act before the end of the year.
Because there will likely be significant overlap, providers will want to train staff with comprehensive programs that cover both regulations.
And because the 401(k) industry already went through the process of preparing for the DOL’s now-defunct fiduciary rule, the publication says, many feel well-versed in this type of preparation.
“The SEC said that recommending an ‘account type’ is an ‘investment strategy’ and therefore Reg BI and the best interest standard applied to those recommendations,” Reish told Ignites. “That includes retirement plan accounts, individual retirement accounts, individual retirement annuities, health savings accounts, 529 education accounts, and so on.”
Rollover recommendations are certainly affected, Reish noted.
“Thus, when a recordkeeper recommends a rollover from a plan [at another provider] to one recordkept by the provider, or a recommendation to a participant to rollover to an IRA, the broker-dealer and its representatives must adhere to the best interest standard of care in Reg BI beginning June 30, 2020.”