November 07, 2023

Fred Reish Discusses Potential Impact of DOL Fiduciary Proposal With Financial Advisor Magazine

In “DOL Fiduciary Proposal Allows Class Action Suits Against B-Ds and Insurers,” benefits and executive compensation partner Fred Reish spoke to Financial Advisor Magazine, stating that, for the first time, customers may be able to sue broker-dealers, insurance companies and their salespeople if their retirement rollover advice doesn’t meet proposed new Department of Labor (DOL) fiduciary standards.

If a broker or insurance agent making a rollover recommendation receives any compensation, not only would they be defined as fiduciaries for the first time under the DOL’s new fiduciary proposal, but they would be subject to ERISA enforcement provisions, which include a private right of action, Reish noted. If the proposal is approved, “it will open the door to lawsuits by plan participants and class action lawsuits by the plaintiff’s bar.”

Reish continued, “That’s one of the biggest reasons why the brokerage and insurance industries always fight a fiduciary rule.” They’re currently exempt from a fiduciary standard, and “once they are a fiduciary, it triggers other rules, including the private right of action,” he added.

If companies don’t meet the requirements of the rule, they could be sued by individual clients, and if there are systemic issues, attorneys could bring a class action on behalf of thousands of customers, Reish explained. He also believes the industry will see a final regulation from the DOL by next summer.

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