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State securities regulator says states can enforce DOL fiduciary rule
InvestmentNews; Feb 16, 2018 @ 5:20 pm
A prominent state securities regulator backed Massachusetts' effort to enforce the Labor Department's fiduciary rule and said he would do the same thing under the right circumstances.
Industry participants, investor advocates and others were jolted Thursday when Massachusetts Secretary of the Commonwealth William Galvin charged Scottrade Inc. with violating state law and internal policies by conducting sales contests that failed to adhere to the impartial conduct standards of the DOL rule.
Those standards were implemented last June. The remainder of the regulation is delayed until July 2019 during a DOL review mandated by President Donald J. Trump that could lead to major changes. There was some question about whether the applicable parts of the rule would be enforced.
Mr. Galvin gave a resounding answer.
"Massachusetts was certainly within its parameters to say, 'Hey, we've got a problem here,'" said Joseph Borg, director of the Alabama Securities Commission. "I see this as part of the normal scope of what states ought to be doing to protect their citizens and ensure that firms are following their own rules, let alone state rules."
ThinkAdvisor; February 16, 2018
Eugene Scalia, a partner with Gibson Dunn who represents the nine plaintiffs suing the Labor Department over its fiduciary rule, told the U.S. Court of Appeals for the 5th Circuit on Friday that Massachusetts’ action Thursday against Scottrade for allegedly violating the fiduciary rule’s Impartial Conduct Standards is "without merit," and will spark "private plaintiffs...to exploit the rule to concoct state law claims.”
“Although the claims are pleaded under state law, they are premised on Scottrade’s alleged violation of the U.S. Department of Labor’s fiduciary rule and related company policies,” Scalia wrote.
The charge, levied by Massachusetts Securities Regulator William Galvin, “which seeks censure, fines, and disgorgement, among other penalties — vividly illustrates the urgent need to vacate the rule,” Scalia told the court.
InsuranceNewsNet; February 16, 2018
A decision by Massachusetts’ regulators to file state charges against Scottrade by claiming it violated the Department of Labor fiduciary rule has surprised many industry analysts.
In a complaint filed Thursday, state regulators claim the discount brokerage engaged in improper sales practices. Scottrade “knowingly” tied sales contests to retirement accounts, regulators say in the 20-page court filing.
But all of the violations alleged by the Massachusetts Securities Division are of state law. In short, the state claims Scottrade ignored the policies and procedures it put in place starting June 9 to comply with the DOL rule.
By ignoring those policies, the state claims Scottrade violated state laws by conducting transactions in bad faith. Secretary of the Commonwealth William Galvin seeks a return of profits Scottrade earned from the alleged activities, and is seeking an undisclosed administrative fine.
The role the DOL rule played in the charges has analysts rethinking their advice. The Trump administration advised early in 2017 that it would not be pursuing enforcement of the fiduciary rule as long as companies were acting “in good faith” to comply.
InvestmentNews; Feb 17, 2018 @ 6:00 am
Fidelity Investments is the undisputed titan of the retirement marketplace.
With $1.64 trillion in defined-contribution-plan assets under its belt, the Boston-based mutual fund company administers more than $1 trillion more in DC-plan assets than its closest competitor, and controls roughly 23% of the $7 trillion market. As one of the fastest-growing providers, Fidelity is more than maintaining its sizable lead.
But some financial advisers fear the titan is starting to infringe on their turf. Those advisers are wary of recent business maneuvers Fidelity has made, which they claim compete directly with them.
Advisers say such moves — like providing fiduciary 401(k) investment advice to employers and serving as the broker through its new employee-benefits exchange — combined with Fidelity's massive scale could put them in a tough spot.
"They're the 800-pound gorilla, so you kind of have to be close with them. But they're competing with us," said Blake Thibault, managing director at Heffernan Financial Services, which oversees around $3 billion in retirement plan assets.
What it means to be a 'point in time' fiduciary
InvestmentNews; Feb 17, 2018 @ 6:00 am
Fidelity Investments' decision to serve as a "point in time" fiduciary to 401(k) plan sponsors may have some people asking, "What does that mean, exactly?"
The answer boils down to timing, explained David Levine, a principal at Groom Law Group.
"There's really only one real definition of 'fiduciary' in [the c], but the question is: When are you acting as a fiduciary?" he said.
Financial advisers serving as investment fiduciaries to 401(k) plans typically have an ongoing relationship to the plan, meaning they help employers select investments for their 401(k) and continue to monitor the investments to assess if they're still prudent to use.
ThinkAdvisor; February 15, 2018
Insurers have kept the press release wires burning in recent years with announcement after announcement about the launch of new, fee-based life insurance and annuity products.
LIMRA reported in November that, in the third quarter of 2017, actual sales of fee-based indexed annuities accounted for just $48 million of the $14 billion in indexed annuity sales recorded that quarter.
David Lau, the founder and chief executive officer of Littleton, Colorado-based DPL Financial Partners, said Thursday, in an interview, that there's a simple reason fee-based life and annuity product sales have been low: typical insurers have paid too little attention to the needs of RIAs, the people who have been selling fee-based products all along.
Typical insurers' systems "are built for paying commissions," Lau said.