On March 30, 2017, FINRA issued Regulatory Notice 17-11 (Financial Exploitation of Seniors), announcing the SEC’s approval of amendments to the FINRA rulebook related to the financial exploitation of senior investors. More specifically, as adopted, the amendments to FINRA Rule 4512 would require broker-dealers to make reasonable efforts to obtain the name and contact information for a “trusted contact person” for a customer’s account. In addition, new FINRA Rule 2165 would permit (but not require) broker-dealers to place temporary holds on disbursements of funds or securities from the accounts of certain senior investors, as well as other investors with diminished capacity, when there is a reasonable belief of financial exploitation. The FINRA notice announces an effective date of February 5, 2018, and clarifies, among other things, that the temporary hold on disbursements should not apply to securities transactions.
The DOL issued a Field Assistance Bulletin (FAB 2017-01) on Friday, March 10, 2017 to address near-term compliance concerns relating to a proposed 60-day delay of the Fiduciary Rule. As previously reported, the DOL issued a proposal on March 2, 2017 to delay the April 10, 2017 implementation date of the Fiduciary Rule by 60 days. This 60-day delay is not yet final, however, and there has been confusion over what will happen if a decision on the delay is not made until after April 10 or if a decision is made too close to the implementation date to allow time for compliance. Although the DOL has stated that it intends to issue its decision before April 10, it issued the Bulletin to announce a temporary enforcement policy which provides certain limited enforcement relief.
With recent developments in all three branches of government bearing on the authority and timing of the new DOL final rule expanding the definition of fiduciary “investment advice” for purposes of ERISA, the already formidable challenges for plan sponsors and retirement product and service providers have been made more difficult.
Additional contributor to this post:
A proposal seeking to delay the applicability date of Department of Labor’s fiduciary duty rule (“DOLFR”), which impacts the compensation received by broker-dealers and investment advisers for the distribution of covered retirement accounts, was published on Thursday, March 2, 2017. According to the federal register’s notice, the applicability date (which had been scheduled for April 10, 2017) was proposed to be delayed by 60-days to June 9, 2017. The proposal allows for a 15-day comment period from the March 2, 2017 publication date, which would end on March 17, 2017. The proposal also invited comment on a February 3, 2017 Presidential Memorandum to the Secretary of Labor, requesting broader review of DOLFR and its related exemptions.
For more on the DOLFR, including legal alerts and commentary, see www.dolfiduciaryrule.com.
The SEC staff’s recent guidance on robo-advisers is the most comprehensive SEC guidance to date concerning the considerations robo-advisers should keep in mind in meeting their legal obligations under the Advisers Act. The staff notes that robo-advisers, like all registered investment advisers, are subject to the substantive and fiduciary obligations of the Advisers Act. The staff further indicates that because robo-advisers rely on algorithms, provide advisory services over the internet, and may offer limited, if any, direct human interaction to their clients, their unique business models may raise certain considerations when seeking to comply with the Advisers Act.