Welcome back to the Compliance in Context Podcast! On today’s show, we feature a Lessons From The Front Lines episode where we welcome an august panel we will be providing an in-depth look at the embattled DOL Fiduciary Rule—including where are we now, what’s next, and what other best practices firms should firms have in place currently regarding any investment recommendations being made and other services provided to retirement investors. To help guide us through this important topic and share some fantastic insights for our listeners, we welcome in august panel of experts—Jason Berkowitz with the Insured Retirement Institute, David Kaleda with the Groom Law Group, and Jason Roberts with the Pension Resource Institute.

Show

Interview with Jason Berkowitz, David Kaleda, and Jason Roberts

• Reviewing the current state of the DOL Fiduciary Rule
• Is there a path where the DOL gets the decision reversed or where PTE 2020-02 gets separated out?
• With the recent DOL Fiduciary Rule getting stayed, where does that leave ERISA investment fiduciaries? What is the status quo?
• Understanding the 1975 regulation and PTE 2020-02
• What is the impact of the Florida district court ruling?
• Best practices around providing investment recommendations to retirement investors
• What are the types of things compliance officers can build into their programs now to ensure compliance to PTE 2020-02?
• What about disclosures for IRAs to IRAs?
• What about the annual review?
• Reviewing Reg BI, NAIC, and the full regulatory framework and the related obligations for market participants
• What is the current state of enforcement in this area?

Quotes

05:57 – “Let me just start with a quick overview of what the regulatory package is, that was adopted earlier this year. It included four components. The first component is a change in the definition of who is a fiduciary under ERISA. And then the other three changes, or the other three components, rather, were changes to what are called prohibited transaction exemptions, which are essentially the rules that ERISA fiduciaries have to follow in order to receive compensation for their services. And, in effect, essentially the way that, at least for my organization and our members, we look at this final regulatory package as significantly expanding the reach of fiduciary status to reach almost any financial professional who interacts in any way with a retirement saver and create significant new burdens and hassles for those individuals in order to get paid.” – Jason Berkowitz

09:18 – “So at this point we're still waiting to see how this will be resolved. There are really two tracks here. One is just this effective date stay, and the other the next track is the merits of the case, whether the DOL even has the authority to do this in the first place. So the DOL did file a notice of interlocutory appeal, which basically means they're appealing the stay at this point and also all the parties had been working on a decision on the underlying regulation and exemptions that's being put on hold so that the DOL can at least consider what they're going to appeal. At this point, they've just noticed the court that they could appeal. Whether they do or not, I guess, remains to be seen.” – David Kaleda

Welcome back to the Compliance in Context Podcast! On today’s show, we feature a Lessons From The Front Lines episode where we welcome two very special guests, namely Ms. Alpa Patel and Mr. Igor Rozenblit, to share their fantastic insights and help us unpack the Loper Bright and Corner Post decisions, PFAR getting vacated, and what’s next on the examination and enforcement front.

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Interview with Alpa Patel and Igor Rozenblit

• Reviewing recent judicial developments
• What happened in Loper Bright Enters. v. Raimondo
• What does the end of Chevron mean and what are the key takeaways?
• How does the decision in Corner Post, Inc. v. Bd. of Governors of the Fed. Resrv. Sys. extend the impact of Loper Bright/end of Chevron and potential future agency rule challenges?
• Reviewing the Private Fund Adviser Rules being vacated
• What happened in Nat’l Ass’n of Private Fund Managers v. SEC?
• How do you see this impacting SEC Examinations and Enforcement?
• Where are the key areas that you expect to see a continued focus from the Staff?
• Discussion of recent SEC Enforcement, including the focus on recordkeeping
• Analyzing the current regulatory environment, the industry’s appetite to challenge the SEC on certain issues, and the impact of the upcoming presidential election

Quotes

12:10 – “The rules expanded over the years, and it was always in reaction to litigation, right? Sothis will just be more. PFAR being dropped, and that was obviously more on a statutory authority side. But when you have a rule that’s struck down for being arbitrary and capricious, which is normally how these rules go, the answer to that is, well, let me give you more reasons. And that is why, you know, our releases ended up just writing more. The more you can draft, the better because you’re trying to counteract the idea that you did not address some random issue that a commenter raised, you know, in their 600-page comment letter. So that’s, that is the give and take and sort of the beauty of the Administrative Procedures Act of, well, okay, you’re telling me I didn’t do enough. I will do more. And that’s exactly where you’re going to end up more here.” – Alpa Patel

23:55 – “I think the vacation of PFAR didn’t really change the examination approach of the commission at the moment. I think, had PFAR stood, there was a pretty good probability that exams would have changed pretty significantly and would have transformed into a group that tests a lot of the PFAR disclosures that were required, but that did not happen. In terms of the areas that PFAR covered, those areas are traditional exam risk areas, and that is why they were in PFAR. It really didn’t work the other way around. So in terms of what exam does now, it’s really a version of what they’ve always been doing, which is identifying potential conflicts of interest, identifying potential technical violations of certain rules, including the books and records rule, which is kind of a hot topic right now, and pursuing thos...

Welcome back to the Compliance In Context podcast! On today’s show, we perform a comprehensive review a of rule proposal from 2024 with the biggest long-term impact to the RIA community—namely AML rule proposal from FinCEN. In our Headlines section, we review recent decision from the Fifth Circuit court to stay the new DOL Fiduciary Rule that was issued earlier this year. And finally, we’ll wrap up today’s show with another installment of What’s On My Mind, where we take a quick moment to visit the 2024 Paris Olympics and review how some of the greatest athletes in the world can give us a critical insight into being the best versions of ourselves and building our own firm’s best compliance program.

Show

Headlines

• New DOL Fiduciary Rule and the amendments to PTE 2020-02 and PTE 84-24 stayed by two district courts in Texas

Interview with Ed Wegener and Laura Goldzung

• Reviewing the FinCEN Rule Proposal to apply AML/CFT (Countering the Financing of Terrorism) requirements pursuant to the Bank Secrecy Act
• What does the rule proposal say? What will investment advisers need to do?
• What kind of training should be performed in this area? What other preparations will advisers need to make?
• What about dual registrants? Can the AML programs of broker-dealer affiliates be leveraged?
• What are some key factors that RIAs will need to keep in mind if the proposal is adopted?
• What kind of expectations should be in place from a compliance perspective?
• Is there required testing that needs to be performed?
• What requirements are placed on AML Officers?
• What kind of ongoing due diligence will be necessary or expected?
• What is the cost of compliance in this area? Do you anticipate the regulatory focus and related costs going up or down in the future?

What’s On My Mind

• What can Olympic athletes teach us about developing the best compliance program possible and not letting immediate perfection becoming an impediment to growth

Quotes

10:26 – “Earlier this year, FinCEN proposed adding investment advisors as designated financial institution for AML and CFT purposes. And then additionally following on that, FinCEN and the SEC issued a joint proposal that would require investment advisors to comply with the customer identification and verification requirements, as well as the requirements to identify and verify identities of certain beneficial owners of legal entity customers. So in a nutshell, the impact will be that once this rule becomes effective and we meet the implementation date, investment advisors are going to have virtually the same requirements that certain other financial institutions have with respect to AML programs, including broker dealers. So many investment advisors who have affiliated broker dealers are well aware of those requirements, but we’re working with all of our investment advisor clients to understand what those expectations and requirements may be and how they can prepare for that.” ~ Ed Wegener

20:54 – “In the proposal, Vincent talked about the training needing to be designed based on the roles of the individuals that are being trained. So you have to distinguish different roles....