DOL Fiduciary News: January 12, 2018
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FINRA focusing on shift to fee accounts in 2018
BenefitsPro.com; January 11, 2018
Regulators at the Financial Industry Regulatory Authority will focus on recommendations to shift retail investors from brokerage accounts to advisory accounts in 2018, according to a recently released regulatory and exam priorities letter.
Previous exam priorities have not included a focus on recommendations to move to fee-based accounts.
Under rule 2111 of FINRA’s regulatory manual, which establishes the so-called suitability standard, brokerages and registered members must have a “reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer.”
The new focus on fee-based account recommendations comes after the Department of Labor’s fiduciary rule was partially implemented in June of 2017.
Under the rule’s impartial conduct standards, brokers and advisors must make recommendations in the best interest of investors, charge only reasonable commissions and fees, and not make misleading statements.
Bill requiring fiduciary disclosure reintroduced in New Jersey
InvestmentNews; Jan 11, 2018 @ 4:50 pm
New Jersey state lawmakers introduced legislation this week that would require financial advisers to disclose their fiduciary status to investors.
Under the measure, advisers who do not have to meet a fiduciary standard must tell clients in a compulsory statement.
"I am not a fiduciary," reads the language included in the bill. "Therefore, I am not required to act in your best interests, and am allowed to recommend investments that may earn higher fees for me or my firm, even if those investments may not have the best combination of fees, risks and expected returns for you."
The legislation's sponsors — Sen. Patrick J. Diegnan Jr., D-Middlesex; Assemblywoman Nancy J. Pinkin, D-Middlesex; and Assemblyman Nicholas Chiaravalloti, D-Hudson — refiled the bill Tuesday, after it failed to become a state law in the previous session of the legislature.
New York Best Interest Proposal ‘Burdensome,’ Law Firm Finds
InsuranceNewsNet; January 11, 2018
The “best interest” standard proposed by New York State exposes insurance/annuity writers to liability risks that exceed the Department of Labor rule, a prominent law firm concluded.
Announced early this month, the New York proposal imposes “burdensome compliance obligations” and “certain requirements that appear impractical,” the law firm Drinker Biddle & Reath concluded in its analysis.
Likewise, the New York standard exceeds the model law prepared by the National Association of Insurance Commissioners, the law firm added. NAIC model laws are usually the standards that states defer to when adopting insurance regulation.
While the NAIC law applies a “best interest” standard to annuity sales only, the New York proposal applies to sales of both insurance and annuity products.