In the article “Reg BI Compliance Only Partly Covers DOL Requirements,” InsuranceNewsNet shared webinar insights from benefits and executive compensation partner Fred Reish on what broker-dealers, investment advisers and insurance distributors need to know about the Department of Labor’s (DOL) newly released guidance for the investment advice rule.
Reish explained that if advisers or agents recommending a rollover have or will have an ongoing relationship with the client, they are considered a fiduciary under the DOL’s rules and guidance.
“If an adviser or an agent makes a rollover recommendation today, and it satisfies that regular basis test, or the five-part test, that is a fiduciary act,” Reish noted. He added, “And you have to engage in a prudent process under ERISA to make the recommendation,” referring to the impartial conduct standard.
Reish also warned that broker-dealers and investment advisers should not ignore compliance with prohibited transaction class exemption (PTE) 2020-02 just because they are abiding by the Securities and Exchange Commission’s (SEC) Best Interest (Reg BI) rule. He said the PTE’s bedrock comes first, the impartial conduct standard, which sellers must already be complying with as a fiduciary starting Feb. 16.
“The hard part of that is getting the information required to satisfy the best interest standard of care, which would include, among other things, information about the investments, cost and services in the plan, as well as the proposed individual retirement account (IRA),” Reish said. He added that the requirements kick in even if it is a rollover from plan to plan or IRA to IRA, not just plan to IRA.