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DOL Fiduciary News: February 13, 2018

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Big I Criticizes NAIC Draft on Best Interest Conduct Standard for Annuities Transactions

News Service via Bestwire -- February 12, 2018 11:54 AM

WASHINGTON -- The Independent Insurance Agents and Brokers of America opposes proposed changes made by a National Association of Insurance Commissioners’ draft to the group’s annuity suitability model, which would include a best interest standard of conduct for annuities transactions, arguing it would cause market uncertainty and increased costs.

The NAIC’s annuity suitability working group began considering draft changes to its model during its December meeting in Honolulu.

The proposed changes include having producers or insurers make recommendations to customers that are suitable and in the best interest of the consumer at the time. Insurers or producers must disclose to consumers material conflicts of interest; the percentage or amount of cash compensation above 3% that a producer receives from a contract for services for advice or sale of a recommended entity; and any basis for a recommendation.

Wes Bissett, Big I’s senior counsel, government affairs, said the draft proposes sweeping changes to the law without justification and without discussion of whether meaningful regulatory gaps exist. “The proposal seems to presume that insurance producers routinely act in their own self-interest to the detriment of customers and that extensive changes to the model and existing law are needed, but that is simply not the case,” he wrote.

SEC offers advisers amnesty to move clients out of high-fee mutual fund share classes

InvestmentNews; Feb 12, 2018 @ 5:04 pm

The Securities and Exchange Commission on Monday launched an initiative to waive fines against investment advisers who come forward and admit that they had been putting clients into high-fee mutual fund classes and agree to reimburse those clients.

According to the announcement, under the Share Class Selection Disclosure Initiative, the SEC's enforcement division "will not recommend financial penalties against investment advisers who self-report violations of the federal securities laws relating to certain mutual fund share classes and promptly return money to harmed clients."

The announcement, which twice references "widespread" lack of fee disclosures, is the latest sign of an increased effort by regulators to crack down on investment fees.

In December, the SEC filed a complaint against a Connecticut investment adviser who invested clients' money in mutual fund share classes with 12b-1 fees when the same fund without such fees was available.

...The SEC's Monday afternoon announcement cited Section 206 of the Investment Advisers Act of 1940, which imposes a fiduciary duty on advisers to act in the best interest of clients, including disclosing conflicts of interest.

The SEC is giving advisers until June 12 to announce their intention to self-report. 

401(k) plan sponsors are increasingly hiring fiduciary advisers

InvestmentNews; Feb 13, 2018 @ 3:00 am

Employers sponsoring a 401(k) plan, especially small business owners, are increasingly hiring investment advisers who serve as fiduciaries to their retirement plan, new research suggests.

About 70% of all 401(k) plans used an independent investment adviser — separate from the plan's record keeper — to assist with fiduciary responsibility in 2016, according to a new study from the Plan Sponsor Council of America. That's up about 3 percentage points over 2013.

"There's been a focus on fiduciary responsibility in light of all the lawsuits and the fiduciary rule," Hattie Greenan, the PSCA's director of research, said. "I don't think it's surprising we see an increased use of plan sponsors using independent, outside advice."

The trend is most pronounced among smaller plan sponsors, PSCA data shows. 401(k) plans with between 50 and 199 participants saw use of fiduciary advisers swell 10 percentage points, to 67% of plans, from 2013 to 2016.

Similarly, plans with between 200 and 999 participants saw growth of 8 percentage points, to 77%; the smallest plans (1-49 participants) got a boost of 7 points, to 59%. 

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