December 06, 2016
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Shearman & Sterling partner Kenneth J. Laverriere and knowledge management attorney Matthew H. Behrens (both New York-Compensation, Governance & ERISA) authored an article titled “The US Department of Labor’s Final ‘Fiduciary’ Rule Incorporates Concessions to Financial Service Industry but Still Poses Key Challenges” in the Journal of Investment Compliance (JOIC), published by Emerald Group Publishing.
On April 6, 2016, the US Department of Labor issued its final “fiduciary” rule. Over 800 pages in length and more than 15 years and three iterations in the offing, the rule and its related prohibited transaction exemptions (“PTEs”) will, for the first time since the passage of ERISA, subject many of the investment and asset management recommendations from broker-dealers, banks and other financial organizations to individual retirement accounts (“IRAs”) and other retail retirement clients to ERISA’s fiduciary standards and remedies.
The most immediate impact of the rule will be on the compensation practices at broker-dealers and other financial institutions and on the fee and revenue-sharing arrangements among funds, fund sponsors and the financial institutions that offer investment advice to retail retirement clients. Although the new rule responds to many of the concerns raised by the financial services industry, compliance with the rule will require the restructuring of pay and compliance policies at financial institutions servicing retail clients.
In this article, Ken and Matthew describe the main provisions of the rule, as well as the key terms of the new and amended PTEs promulgated by the DOL.
The Journal of Investment Compliance provides current and practical advice on regulatory and compliance issues relevant to compliance professionals, offering insight into the future direction of the industry and the compliance implications