Insights from the experts in investment fiduciary responsibility.

Q&A on the DOL Rule: Product Impact

Posted by Duane Thompson on May 03, 2016

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Two weeks ago, we presented webinars covering the DOL’s recently released fiduciary rule. A recording of that webinar is now available. During that webinar we received over 80 questions. We were not able to answer all of those during the one hour session, but we have compiled and answered them here. The questions are categorized, and we will do separate blog posts to address all of the questions within a given category. These questions are not comprehensive of the rule, they only address the questions that were submitted. Think of them as an addendum to the webinar. For a more comprehensive view of the rule, we recommend you view the recording, as well as download our Executive Summary and Client Memo documents

In our fourth Q&A blog post from the webinar, we are looking at questions having to do with the impact of the rule on various products. Please note: the views expressed herein are strictly informational, do not represent an official position of fi360 on regulatory or legislative matters, and should not be relied upon as legal, compliance or investment advice. 

Q: Are group annuities (whether they are registered or unregistered) covered under 84-24 or would they need to comply with BICE? 

A: A group annuity transaction to a plan involving fixed annuities – generally immediate or deferred annuity contracts – would be covered under revised PTE 84-24, effective April 10, 2017. 

Q: Any specific mention of liquid alternatives, specifically? Is increased scrutiny applied based on an asset class/type, or will strategy, track record, and risk management be considered in the best interest decision of ERISA and non-ERISA accounts?

A: The final rule does not provide much detail on specific products since the proposed definition of an “Asset” was removed from BICE.  Any product can theoretically be sold through a plan’s brokerage window or to an IRA as long as it meets ERISA’s prudence standard.  That said, rest assured that regulators – including the SEC and FINRA – will pay special attention to recommendations to purchase higher-risk products, including liquid alts, non-traded REITS, and other illiquid and hard-to-value products.

Q: Will the new ruling cause agents who sell equity-indexed annuities to get the Series 65 (IAR) license?

A: No.  A federal court overturned an SEC rule in 2010 that would have required regulation of equity-indexed annuities as a security.  Insurance producers selling EIAs will not be required to register as investment advisers because of the DOL rule. 

Q: Any specific mention of Liquid Alternatives, specifically? Is increased scrutiny applied based on an asset class/type, or will strategy, track record, and risk management be considered in the 'best-interest' decision/discussion of ERISA and non-ERISA accounts?

A: Restriction on products under BICE completely removed.  Subject only to best interest standard.  However principal transactions standard (selling from inventory) has significant product restrictions.

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