DOL Digest May 8, 2017

SSN Marketing Compliance, DOL

What the DOL Rule Delay Means for Our Advisors

As we communicated on April 5, the Department of Labor has delayed implementation of its fiduciary rule until June 9, with some aspects delayed until Jan. 1, 2018. At this time, we do not have any indication that the June 9 effective date will be postponed.

The DOL’s definition of a fiduciary will be effective on June 9, as will the prohibited transaction provisions of the rule. Under the DOL definition, an advisor acts as a fiduciary when he or she makes a recommendation to an investor to buy, sell, hold or exchange investments in a retirement account; take a distribution from a retirement account; select an investment manager or investment strategy for a retirement account; or select a commission vs. a fee-based retirement account.

The Impartial Conduct Standards will also be effective June 9. These include the requirements that an advisor provide advice that is in the best interest of the client, regardless of financial interests; charge reasonable compensation; and avoid misleading statements. The remaining provisions of the Best Interest Contract (BIC) have been delayed until Jan. 1, 2018, including the implementation of contracts with retirement investors, warranties, disclosures and permissible class action lawsuits. This means broker-dealers will not be required to mail clients a transitional transaction disclosure notice on or prior to June 9; however, a negative consent notice bringing eligible accounts under the BIC will likely still be required prior to Jan. 1.

IRA rollovers will be required to adhere to the extra considerations and documentation requirements by June 9. Those considerations include documenting to a client alternatives to the rollover considered as well as
the fees and expenses associated with the current retirement plan and the proposed IRA. We will be introducing an updated IRA Rollover Acknowledgement form and a new IRA Rollover Guide prior to the rule’s effective date.

Advisory accounts cannot qualify for an exemption, so compensation in these accounts must be level by June 9 for the advisor and Securities Service Network. This doesn’t mean you have to charge the same fee to all clients; it means you cannot receive unlevel compensation based on the assets managed in the program. For instance, you cannot receive more compensation by recommending one money manager or a particular security type over another inside the same advisory program. This also means we must eliminate the Premier Partner Ticket Charge subsidy program on retirement and IRA commission-based accounts. We can continue to offer no transaction fee (NTF) funds that National Financial and Pershing make available in our advisory programs. While the move to lower-cost share classes in advisory accounts is being driven by the Securities and Exchange Commission (SEC), it will also satisfy elements of the DOL fiduciary rule.

We do not anticipate any further delay in the effective date for the DOL’s fiduciary definition or the Impartial Conduct Standards beyond June 9.

As mentioned above, we do not anticipate any further delay in the effective date for the DOL’s fiduciary definition or the Impartial Conduct Standards beyond June 9. The DOL has indicated it will spend the rest of the year reviewing the exemption requirements and processes; however, there is no guarantee that the review will result in a further delay of the exemption provisions of the rule or substantive changes to the exemption provisions. More likely, product companies will continue their work to establish acceptable standardized compensation levels for specific product types, essentially evolving to meet the existing rule requirements.

We continue to work on system changes needed to comply with the rule and to communicate closely with our product sponsors regarding the introduction of new standardized compensation levels by product type. We will bring you more information as it becomes available, so please watch for emails from Securities Service Network regarding training, commission product changes and new FAQs on the lower-cost share class conversion.

If you have questions regarding the DOL Fiduciary rule, please send an email to

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