On June 29, 2020 the Department of Labor issued its long-awaited fiduciary rule re-proposal, just in time for all of us to turn from Regulation Best Interest implementation, which had a deadline of June 30, to analyzing the DOL rule proposal.
As we predicted a couple of weeks ago in our Standards of Care Quick Take, this DOL proposal is designed to work better with Reg BI. Notably, the proposal takes into account both Reg BI and the fiduciary duty of investment advisers. Such coordination across standards of care regime is unprecedented, and a positive change after years of lack of coordination. We are continuing to work through the proposal but especially want to highlight the DOL proposal's alignment with Reg BI.
I also wanted to note three related standards of care developments:
- Form CRS FAQs - On June 26, 2020, the Form CRS FAQs were updated. Firms would benefit from reviewing the updated FAQs, both to ensure that no changes need be made to their existing Form CRS, but also as the latest FAQs provides clarity on the Form CRS delivery and re-delivery triggers. For example, the SEC staff notes that “for instance, new types of services that might trigger delivery under General Instruction 9.A.(iii) include the initial recommendation or provision of margin capability, options eligibility, account monitoring, or discretionary trading.”
- Reg BI and Form CRS Exams - the SEC issued two risk alerts in April regarding Reg BI and Form CRS Exams. We also addressed these alerts in our Standards of Care Quick Take, noting that exams would begin in early July.
- Massachusetts Fiduciary Rule for Broker-Dealers and their Reps – The enforcement deadline for this rule is set for September 1, 2020, and will remain unchanged. As firms return to work on MA rule implementation, they may find our summary comparing this rule to Reg BI helpful.
The best interest standard in the new proposed class exemption is aligned with the conduct standards in the Securities and Exchange Commission’s Regulation Best Interest and the fiduciary duty of registered investment advisers under securities laws.