Spotlight

DOL Adopts New Fiduciary Rule

• On April 23, 2024, the DOL adopted their new Fiduciary Rule titled: “The Retirement Security Rule: Definition of an Investment Advice Fiduciary.”  The new rule includes a new test to determine ERISA Fiduciary status, replacing the 1975 five-part test.  The new rule provides that, a financial services provider will be an investment advice fiduciary if:

• the provider makes an investment recommendation to a retirement investor;
• the recommendation is provided for a fee or other compensation, such as commissions; and
• the financial services provider holds itself out as a trusted adviser by:
• specifically stating that it is acting as a fiduciary under Title I or II of ERISA; or
• making the recommendation in a way that would indicate to a reasonable investor that it is acting as a trusted adviser making individualized recommendations based on the investor's best interest.
• The DOL’s press release states “The regulation closes the loophole for one-time advice. A financial services provider will be a fiduciary with respect to a recommendation to roll over assets from a workplace retirement plan to an IRA if every element of the fiduciary definition is satisfied.” 
• The DOL amended PTE 2020-02 (for most retirement advice providers) and PTE 84-24 (tailored for use by independent insurance agents).
• Compliance Date: The rule and amendments to the PTEs generally take effect on September 23, 2024, although there is a one-year transition period after the effective date for certain conditions in the PTEs. NOTE: It has been widely reported that industry groups plan to file lawsuits challenging the rule and look to have it vacated.
• You can access more information about the ruling here:
• Biden/Harris Press Release
• DOL Fact Sheet
• Adopting Release
• Amendments to PTE 2020-02
• Amendments to PTE 84-24
• Amendments to PTEs 75-1, 77-4, 80-83, 83-1, and 86-128

SEC Rulemaking & Guidance

SEC Adopts Reforms Relating to Investment Advisers Operating Exclusively through the Internet

On March 27, the SEC announced the adoption of amendments to the rule permitting certain internet investment advisers to register with the Commission (the “internet adviser exemption”). Investment advisers relying on the internet adviser exemption must at all times have an interactive website through which the adviser provides ongoing digital investment advisory services to multiple clients.

The press release is available here.

Shortening the Securities Transaction Settlement Cycle — SEC Issuers FAQs

The staff of the SEC Divisions of Trading and Markets and of Investment Management have prepared responses to frequently asked questions (FAQs) about the standard settlement cycle and investment adviser recordkeeping requirements. They include information about the compliance date, applicability to market participant located outside the United States and foreign securities, and extended settlement and recordkeeping clarifications.

The FAQs and answers to them can be read here.

The final rule is available here.

Other SEC Activities

The 43rd Annual SEC Small Business Forum, “Catching Up with Small Caps”

The 43rd Small Business Forum, “Catching Up with Small Caps,” took place over three virtual sessions, April 16-18, and featured appearances by each of the Commissioners. The Forum is a unique event where members of the public and private sectors gather to provide feedback to improve capital-raising policy for startups, for smaller public companies and for their investors.

More information is available here.

SEC Division of Investment Management Hosts Second Annual Conference on Emerging Trends in Asset Management

On April 17, the SEC Division of Investment Management announced it will host the second annual Conference on Emerging Trends in Asset Management on Thursday, May 16, 2024. The conference will bring together a variety of asset management industry participants, regulators, and academics to discuss emerging trends in asset management.

The press release is available here.

The conference agenda and list of speakers is available here.

FINRA

Advance Notice: Upcoming Trade Reporting Enhancements for Fractional Share Transactions

On March 22, FINRA announced advance notice of future updates to its equity trade reporting guidance, in connection with upcoming enhancements to the FINRA equity trade reporting facilities, to support reporting of fractional share quantities. Members engaged in fractional share trading will be required to report fractional share quantities up to six digits after the decimal. FINRA will announce the specific effective date of the updated guidance in a future trade notice.

The advance notice is available here.

FINRA Adopts Amendments Relating to Protected Option and Warrant Positions Under Rule 4210

On March 19, FINRA announced the amendment of FINRA Rule 4210 (Margin Requirements) to establish a specified exception under the margin rules, with respect to certain short option or warrant positions, on indexes written against products tracking the same underlying index.

Regulatory Notice 24-08 can be read here.

Blog Post: FINRA Enforcement Chief’s Key Objectives

In this April 17 blog post, Bill St. Louis, Executive Vice President and Head of FINRA Enforcement, discusses his key objectives to protect investors, safeguard the integrity of the market and enable FINRA to fulfill its regulatory mandate.

The blog post can be read here.

FINRA PODCASTS

Podcast: Preparing for Change – What to Know About the Shift to T+1

On May 28, U.S. markets are moving to a one-day settlement cycle, familiarly known as T+1. This will have a wide-ranging impact on firms, investors, and regulators. This April 16 podcast discusses issues that market participants need to consider and the testing ahead of the transition.

The podcast is available here.

Podcast: A Cybersecurity Update with FINRA's Complex Investigations and Intelligence Team

This April 2 podcast features Bryan Smith, the new senior vice president of FINRA’s Complex Investigations and Intelligence (CII) team, and Brita Bayatmakou, vice president of the Cyber and Analytics Unit within CII, for an update on CII, the cyber threat landscape, and what firms should be thinking about and doing in response to the latest trends.

The podcast is available here.

Retirement

Department Of Labor Announces Proposed Information Collection to Build Online Search Tool to Help Find ‘Lost’ Retirement Savings`

On April 15, the DOL announced its Employee Benefits Security Administration is proposing to collect information from plan administrators on a voluntarily basis to establish an online search tool to help America’s workers locate lost retirement savings they earned.

The news release is available here.  

Department Of Labor Extends Comment Period For Joint Request on Retirement Plan Benefits Information Provided to Workers, Federal Government

On April 2, the DOL announced its Employee Benefits Security Administration (EBSA), the Department of the Treasury, the IRS and Pension Benefit Guaranty Corporation have jointly extended the comment period soliciting public input on existing reporting and disclosure requirements for retirement plans. 

The news release is available here.

The request for Information-Secure 2.0 Section 319-is available here.

Department Of Labor Announces Final Amendment to “QPAM Exemption”

On April 2, the DOL announced its EBSA has released a final amendment to Class Prohibited Transaction Exemption 84-14, also known as the Qualified Professional Asset Manager (QPAM) Exemption. The QPAM Exemption permits various parties related to employee benefit plans and individual retirement accounts to engage in transactions involving plan and IRA assets.

The news release is available here.

EBSA website.