08.10.22

Firms Warned to Quickly Correct Any DOL Rollover-Rule Violations

by: Tracey Longo

Brokers and advisors have to be ready to immediately correct any violations of the U.S. Department of Labor's rules governing rollovers from retirement assets, Fred Reish, partner in the law firm of Faegre Drinker, said in a new blog. Such corrections—including compensating clients who sustain losses because of violations—are not only a requirement, but will also help firms avoid possible enforcement actions, penalties and loss of compensation down the road, he said. The DOL’s prohibited transaction exemption (PTE) made it clear that “self-correction” is required if firms and their representatives want an exemption from the prohibited conflicts of interest involving rollover recommendations, such as accepting commissions, revenue-sharing and 12b-1, said Reish, who specializes in DOL regulatory issues. He noted that broker-dealers and RIAs were required to begin adhering to the rule’s impartial conduct standards February 1, but firms are already running into compliance problems that requires self-correction. The types of failures Reish is seeing include failure to provide retirement investors with a fiduciary acknowledgement; failure to apply the new rules to recommendations to transfer IRAs from other firms to the advisor’s firm; and failure to have policies and procedures to mitigate the conflicts of interest of both the firm and its advisors.

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