Fiduciary Oversight of Service Providers
Serving as a Plan Sponsor comes with the unwritten-responsibility of using the FINRA BrokerCheck Complaints online tool. The Plan Sponsor who wants to leave no stone un-turned will also use the Investment Advisor Public Disclosure online tool, as well as any tool offered via their State Securities Commission. Plan Sponsors need to be in the know when it comes to with-whom they are entrusting the oversight of the company retirement plan assets. There are many tools to use, and for the sake of being as conservative as possible, it is best to use as many as possible.
Use of Complaint and Disclosure Tools
The retirement plan fiduciary is charged with safeguarding the plan assets. To make a point, albeit an extreme example, would you hire Madoff Securities to oversee your company retirement funds? Knowing your answer, the question now becomes – to where does the responsible fiduciary turn in order to conduct an appropriate fiduciary due diligence process? There are a couple of destinations (website tools) that each plan sponsor should be aware of and view at least annually; and certainly prior to engaging any investment professional.
The websites are a good start
The more information you have, the more accurate the results. Since the contractual capacity that your investment professional is currently operating under (RIA or IAR or Registered Representative) may not be the same capacity in which they served in the past, it is best to obtain results from both sources. However, when looking into the rear-view-mirror of your advisors past – all things may not be as they appear! As Danny Sarch points out, many industry professionals are complaining about the data carried within the tools, stating that the BrokerCheck system “…publishes mere accusations, convenient settlements and decades old misdemeanors.”
The system is less than perfect in the eyes of many investment professionals. Many of their concerns are well founded. Anyone can file a complaint. Just because an individual loses money does not always translate to fraud or malicious intent by an investment professional. Markets go down. The FINRA BrokerCheck complaints seem to fly in both directions – at and from the investment professional community.
Go the Extra Mile
Many plan fiduciaries are not aware that lawyers, accountants, engineers and teachers are exempt from the registration requirements (Section 202(a)(11) (A)-(E) of the Advisers Act). These individuals have no requirement to register and are generally not regulated. If you employ any of these professionals as your investment professional it makes sense to look-under-the-hood a little deeper.
