Final month, colleague Joe Antonakakis and I mentioned the Division of Labor’s Oct. 31 launch proposing a rule that seeks to outline an funding recommendation fiduciary for functions of ERISA, and its proposed amendments to class prohibited transaction exemptions obtainable to funding recommendation fiduciaries, together with PTE 2020-02, the “rollover rule.”
For this column, I once more sat down with Joe to study extra concerning the proposed rule’s corresponding further disclosure and different necessities.
Disclosures
PTE 2020-02 at the moment requires monetary establishments to supply sure disclosures to retirement buyers earlier than participating in a transaction pursuant to the exemption.
Specifically, the monetary establishment (i.e., an funding advisor) should present a written acknowledgement that the establishment and its professionals are fiduciaries and should additionally present an correct written description of the companies to be supplied to the retirement investor, in addition to the monetary establishment’s materials conflicts.
Additional, earlier than participating in a really helpful rollover, the monetary establishment should present retirement buyers with documentation of particular the explanation why the rollover advice is within the retirement investor’s finest curiosity.
As a part of the amendments, the DOL is proposing further disclosures:
Pre-Transaction Disclosures
The proposed rule additional requires that monetary establishments embrace a written assertion of the best-interest customary of care owed by the monetary establishment alongside its preliminary fiduciary disclosure.
Additional, the proposed rule would require monetary establishments to tell retirement buyers of their proper to acquire particular info relating to prices, charges and compensation from the establishment.
The monetary establishment would want to supply the data in adequate element for the retirement investor to make an knowledgeable determination, together with whole compensation that the monetary establishment and funding skilled obtain, not simply the prices immediately paid by the retirement investor.