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DOL Fiduciary News: June 19, 2017

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A.M. Best Briefing: Opposition to Department of Labor’s Fiduciary Rule Continues despite Initial Implementation

June 16, 2017 09:28 AM EDT

OLDWICK, N.J. -- (BUSINESS WIRE) -- The delayed initial compliance deadline for the Department of Labor (DOL) fiduciary rule has passed, and as a result, portions of the rule have become effective immediately, including the Best Interest Contract Exemption (BICE), the Class Exemption for Principal Transactions (CEPT) and final regulations specifying who is a fiduciary.

A new Best’s Briefing, titled, “Opposition Continues Despite Initial Implementation of Department Of Labor Fiduciary Rule,” states that during this transition period, which runs from June 9, 2017, through Jan. 1, 2018, when the rule is scheduled to go into full effect, individuals relying on the exemptions for covered transactions are required to adhere only to “impartial conduct standards.” However, the practical impact of the initial implementation is mitigated by the DOL’s indication that it will not enforce the fiduciary rule during the transition period, so long as fiduciaries are acting in good faith to comply with the regulations.

Who will get fired because of the DOL fiduciary rule?; June 16, 2017

In preparation for the implementation of the fiduciary rule’s impartial conduct standards, some plan sponsors of mega defined contribution plans fired incumbent plan advisors.

And as next year’s compliance requirements with the full rule draw closer, more advisors can expect to be replaced, according to the 2017 Retirement Planscape study, issued by Cogent Reports, a division of Market Strategies International.

According to the report, the seventh in an annual series, 4 percent of sponsors across a sampling of more than 1,400 plans spanning the micro-to-mega spectrum said the impartial conduct standards requirement caused them to fire incumbent advisors.

To date, plan advisor turnover has been highest among mega-plans, with 11 percent of surveyed sponsors saying the rule’s impact led to a change in plan advisors.

But more turnover can be expected before January 1, 2018, when the rule’s full implementation is scheduled. Nearly 20 percent of large and mega-plan sponsors say they will change their plans’ advisors by then.

For SEC Fiduciary Rule, Regulate Titles First: CFA Institute Comments

ThinkAdvisor; June 16, 2017

What’s the first logical step that the Securities and Exchange Commission should take in crafting a fiduciary rule? Regulate advisor and broker titles, advises the CFA Institute.

The Commission “can effectively begin to regain control of this [uniform fiduciary rule] issue by regulating the titles that those who provide personalized investment advice can use,” Paul Smith, president and CEO of the CFA Institute, which sponsors and oversees the Chartered Financial Analyst program and designation, told the agency in a June 13 comment letter.

…CFA and other commenters are responding to SEC Chairman Jay Clayton’s June 1 request for comments on ways to help the agency craft possible changes to the Department of Labor’s fiduciary rule, as well as inform “possible future actions” by the agency on a fiduciary duty rulemaking of its own.

Don’t fear life under fiduciary rule, say Pershing and Morningstar

Financial Planning; June 16 2017, 1:25pm EDT

SAN DIEGO — Complying with the fiduciary rule on a day-to-day basis will not force broker-dealers into a rigid, unworkable model, according to experts from Pershing and Morningstar.

Firms aiming to use the best interest contract exemption to keep offering commission-based accounts have slammed the regulation in letters to the Department of Labor. Uncertainty surrounds the rule, even after DoL Secretary Alexander Acosta announced it would go into effect following a delay.

Executives with Pershing and Morningstar acknowledged in a panel Thursday at the Pershing Insite conference that some questions and criticisms are valid. Yet BD’s currently tangling with compliance should know that firms need not approach the rule in exactly the same way, the experts said.

“We often get asked in the client engagements — and we’ve done literally thousands of these over the last year plus — we’ll often get the question, ‘Does that sound good?’ And my response is, ‘Definitely, maybe,’” Jeff Schwantz, head of client solutions at Morningstar, said to laughter.

American Funds, Others, Back off T Shares As B-D's Face DOL Uncertainty

Financial Advisor; June 16, 2017

The brokerage industry is still up in the air about how to levelize mutual fund compensation in order to comply with the pending DOL rule.

And quite quickly, the new T shares, once seen as a solution, don’t look like good options.

Uncertainty over the final status of the DOL rule, and questions about whether the new share class is really best for clients, has caused the idea to fall by the wayside.

In the last two weeks “we’ve gotten a lot of notification from fund families … that they’re postponing their launch” of T shares, said Rich Calvario, director at Pershing. As a result, Pershing, one of the nation's largest clearing firms, reports just five fund companies ready to go with T shares come January when the DOL rule fully goes into effect.

States Pushing Fiduciary Rule Standards (With Success)

InsuranceNewsNet; June 16, 2017

While industry attention remains laser-focused on the Department of Labor fiduciary efforts, states are sneaking into the regulation game with bold moves.

Nevada surprised industry insiders by quickly debating and passing Senate Bill 383 revising the Nevada Securities Act to stiffen the fiduciary standard.

The bill states that any “broker-dealer, sales representative, investment advisor or representative of an investment advisor shall not violate the fiduciary duty toward a client” imposed in a separate statute.

That separate statute imposes the “duty of a fiduciary” on all financial planners. Senate Bill 383 modifies the definition of “financial planner” to remove from the exclusion broker-dealers, their representatives, investment advisors and their representatives.

Introduced March 20, the bill sailed through the Nevada Assembly and Senate. Republican Gov. Brian Sandoval signed the measure June 2.

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