Expect BI enforcement actions and crackdown on the DOL overthrow in 2022


Although the CRS Form, often referred to as Form ADV Part 3, does not need to be updated annually, the “form update status depends on significant changes to its information.”

Since companies are also completing form ADV updates for the first quarter “and customer statements are also released at the end of the first quarter, this would be a good time to evaluate the information in the CRS form and update it. up to date if changes were needed, ”Lynch advised. “The new CRS form could be delivered to clients along with the first quarter statements. “

Schroeder added that, according to the SEC guidelines, “attempts to streamline / adapt the requirements of the CRS form to a company’s business model will not be approved.”

While it is “very real to include all of the information required by the CRS Form in a concise and easy to read format,” Schroeder said, “the SEC has signaled that it will not tolerate the omission of information. , changing prescribed language, changing the order or format of disclosures, or referring to more detailed disclosures outside of the document.

DOL fiduciary rule

On January 4, President Joe Biden appointed Lisa Gomez, an attorney for ERISA, to head the Department of Labor’s Employee Benefits Security Administration, the agency that oversees pension plan rules.

If confirmed by the entire Senate, Gomez will be the go-to person to help Labor pass a new fiduciary rule.

Phyllis Borzi, former director of EBSA, told me in a recent email that she believed EBSA “is quite advanced in thinking (if not drafting) the structure” of the new fiduciary rule.

Fred Reish of Faegre Drinker said that “publication of a proposed new fiduciary definition and associated prohibited transaction exemptions is imminent, possibly within 60 days.”

However, “this could only refer to the submission of these proposals to the White House” for consideration by the Office of Management and Budget, which could take another 60 to 90 days.

What will the new fiduciary rule say?

Borzi said she expects Labor to propose changes “to the core fiduciary definition to correct obvious flaws / loopholes in the five-part test [on who’s a fiduciary] which have clearly emerged since the publication of the original regulation in 1975. “

The work will also likely offer clarifications “in the context of the rollover, limited by the legal constraints they face based on the odd statutory structure where the DOL has interpretative and administrative jurisdiction over the fiduciary definition and interpretations regarding rollovers. of the IRA, but [the Department of the] The Treasury has the enforcement power through the imposition of excise tax “for prohibited transactions exemptions, or PTEs.

“Without a doubt,” Borzi said, “we will see a proposed tightening through the imposition of new limits and conditions on some existing PTEs,” such as PTE 84-24, which applies to insurance sales (insurance- life and variable, fixed indexed and fixed rate annuities) and the collection of commissions.

Labor has also indicated that it intends to review the terms of PTE 2020-02, dubbed “Improving investment advice for workers and retirees,” Borzi said. This exemption, intended to align with SEC regulations, was authorized to take effect by the Biden administration last February.

Labor could also “even come up with an additional PTE,” Borzi said.

Level the playing field

EBSA, in general, said Borzi, “is concerned about the level playing field between conflicting recommendations regarding insurance products and securities.

“As flawed as many of us think, Reg BI at least places some limits on conflicting advice when investments in securities are recommended,” Borzi said.

In contrast, she continued, the “National Association of Insurance Commissioners Model Law (which is applicable only when and to the extent that each state adopts it and without an apparent enforcement mechanism) states clearly that this is simply a codification of the rather unnecessary [FINRA] adequacy standard.

How will Labor “propose to impose greater liability for conflicting insurance product recommendations than is currently the case?” Borzi wondered.

“I wouldn’t be surprised if the proposed expansion of PTE 2020-02 includes integrating some or all of the insurance products into its jurisdiction, but at the very least I expect them to require the addition of impartial standards of conduct to PTE 84-24 and some of the other older PTEs, ”she said.

Regarding Reg BI, “I think staff from both agencies have continued to discuss how to better coordinate the two standards so that key terms in Reg BI are more clearly defined and more consistent,” he said. she declared. “This does not mean that either agency would defer to the other, but rather that the regulatory structures would be more complementary and coherent than they currently are.”


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