The start of any new year is a good time to digest a quick update on “What are those who regulate retirement plans, advisors and brokers ‘saying and doing’ within the landscape of 401(k) plans?”
The DOL
A look at the positioning of the Department of Labor (DOL) provides insight into what retirement plan fiduciaries and trustees of qualified plans (401(k)s and defined benefit plans) should anticipate.
The DOL fiduciary standard is restrictive in that it is designed to prohibit anyone from engaging in transactions where any conflict of interest is present or permitted. Under the DOL’s proposed fiduciary rules, certain transactions may be permitted providing there is a Best Interest Contract Exemption (a complicated contractual disclosure) which requires new record and reporting requirements. An added complexity will undoubtedly arise with conceivably up to 50 interpretations of state law for these contracts.
The SEC
The Securities and Exchange Commission (SEC) regulates Registered Investment Advisors and their activities. Commission Chairwoman Mary Jo White has communicated that the SEC agency staff is working on a proposal to raise standards for retail investment advice. The Chairwoman had also indicated that the SEC will take the appropriate amount of time to get it right in an attempt to avoid unintended consequences. For that reason, it does not appear that the SEC will engage in any race with the DOL on which agency releases the first fiduciary reform Regulation. The DOL is the speed horse in that race.
FINRA
The Financial Industry Regulatory Authority (FINRA) is a self-regulatory body which oversees licensed securities brokers including those who work with 401(k) plans. During 2016 FINRA is taking steps to formally review how firm culture affects compliance and risk management practices. Organizational culture will be at the top of the list of items that FINRA concentrates on this year. Other areas of concentration during 2016 include conflicts of interest, technology, money-laundering, the sales of proprietary products and the existence of any sub-cultures in the firm.
As a retirement plan fiduciary, it is simple to recognize that authority is taking a much greater interest in the customer experience. The prudent retirement plan trustee is well-served to take notice.
