Fiduciary issues

Washington Pulse: PEP Model Evolves with DOL Proposed Registration Guidance

The DOL has issued a proposed rule on registration for pooled plan providers (PPPs), who may begin offering pooled employer plans (PEPs) on January 1, 2021. As this date quickly approaches, those who are considering offering or adopting a PEP need further guidance. But at least this proposed rule starts to answer some of the many questions that must be resolved before PEPs can become a viable alternative for employers.



Single employer plans are established by individual businesses—or groups of closely related businesses, such as controlled groups or affiliated service groups. By contrast, multiple employer plans (MEPs) have generally been the solution for certain loosely related businesses that want to adopt a common retirement plan. Historically, the rules on who can participate in a MEP have presented significant obstacles for employers: only those in the same bona fide group, association, or professional employer organization (PEO) can adopt a MEP and, until the release of the final regulations on association retirement plans (ARPs) and other MEPs in July 2019, the rules defining such groups were unclear. While the ARP regulations provided much needed clarity and provided an opportunity for expanded use of MEPs, many believed the full potential for MEPs could still not be reached.

Congress addressed this perceived gap by creating the PEP framework in the Setting Every Community Up for Retirement Enhancement (SECURE) Act, which was enacted in December 2019. PEPs offer a different way to gain access to retirement plans by allowing a MEP structure for unrelated businesses. By removing the commonality requirement previously associated with other MEPs, and by transferring most administrative and fiduciary duties from the employer to the PPP under a PEP arrangement, lawmakers hope to reduce employer barriers to adopting retirement plans for their employees.

While the SECURE Act provided a framework, many significant questions must be addressed before prospective providers can confidently enter the PEP marketplace. The SECURE Act directs various federal agencies to provide necessary guidance, including model plan language, that identifies the administrative duties and other actions required of PPPs. But even as we await further guidance, the SECURE Act provides important details about PEPs and PPPs.

NOTE: Before guidance describing the operational aspects of PEPs is issued, employers and pooled plan providers who comply in good faith with a reasonable interpretation of the SECURE Act provisions will be treated as meeting the requirements.

PEP documentation. The Treasury Department is required to issue model plan document language (as well as other guidance). The PEP plan documents must contain, among other things, the following provisions:

  • Designation and acknowledgement in writing that the PPP is a named fiduciary and plan administrator under ERISA.
  • Designation of one or more trustees (other than the employer) as responsible for collecting contributions, holding the assets of the plan, and implementing written contribution collection procedures.
  • Prohibition on unreasonable restrictions, fees, or penalties charged by the PPP to employers, participants, and beneficiaries with regard to ceasing participation or other plan transactions, such as distributions and transfers.

Fiduciary responsibilities. With single employer plans, employers bear fiduciary responsibility for plan operations; with pooled employer plans, PPPs are required to be a named fiduciary. So while employers cannot fully delegate all of their fiduciary duties, they can share the burden with the PPP.

Each employer in the PEP retains fiduciary responsibility for

  • Prudently selecting and monitoring the PPP,
  • Prudently selecting and monitoring any other named fiduciaries of the plan, and
  • Investing and managing their employees’ assets within the PEP (unless the PPP delegates this duty to another fiduciary, such as an investment advisor).

The PPP takes over plan administration—such as facilitating plan amendments, testing for compliance, and filing annual information returns—but employers still have a role in monitoring the PPP. The process begins, however, with the registration of PPPs.


Electronic Registration for Pooled Plan Providers

The SECURE Act requires each PPP to register with the DOL and the Treasury Department—and to register each PEP that it establishes. This requirement will be satisfied by completing the new Form PR – Registration for Pooled Plan Provider, which is included in the DOL’s proposed rule. By gathering this information, the DOL and Treasury will be better prepared to oversee the PEP market and to provide regulatory agencies, prospective employer customers, and the public with relevant data about available PPPs.

Each PPP will be responsible for its own registration and for any update or supplement to past filings.

  • Initial Registration – 30 to 90 days before beginning operations, the PPP must register with basic identifying information and a summary of its services, marketing activities, and any pending legal or regulatory actions in which they are involved. The DOL considers a PPP to begin operations when it begins publicly marketing a PEP. Under the proposed regulations, “preliminary business activities” may be undertaken before registration, but publicly marketing services as a PPP cannot.
  • Supplemental Notice – The PPP must inform the DOL of each new PEP and make supplemental filings within 30 days of any change to the initial registration—or of other changes such as a significant change in business structure of the PPP.
  • Amendments – Errors and omissions related to the initial registration must be corrected by amending the filing within a reasonable period following discovery.
  • Final Filing – The PPP must complete a final filing when the last PEP it administers is terminated and all assets have been properly distributed.

Consistent with regulatory efforts to simplify procedures and become paperless, the DOL will administer the registration process online with the same “EFAST 2” electronic filing system currently used to receive the Form 5500.


Comment Period

The proposed rule was published in the Federal Register on September 1, 2020 with a 30-day comment period, so the DOL will accept comments until October 1, 2020. Comment has been requested on various aspects of the PPP registration process to ensure that the proposed rule is not unreasonably burdensome. The DOL has specifically asked for comments on particular concerns, including whether PPPs should be required to report additional information upon registration and whether the DOL should refer to other filings to acquire information necessary for registration.


Next Steps

In order to make the registration platform available before the start of 2021, the DOL will need to issue a final rule on registration requirements soon after the comment period ends. The DOL’s proposed registration requirement alone is not likely to dissuade those institutions who are already preparing to become pooled plan providers. But more guidance on PEPs and PPPs is still needed.


Ascensus will continue to follow any new guidance as it is released. Visit for the latest developments.


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DOL Proxy Voting and Shareholder Rights Proposed Regulations in Today’s Federal Register

Appearing in today’s Federal Register are proposed regulations issued by the Department of Labor’s Employee Benefits Security Administration, intended to govern proxy voting and shareholder rights exercised by fiduciaries of ERISA-governed retirement plans. These proposed regulations will amend an existing investment duties regulation that has been in place since 1979.

(A pre-publication version of these regulations, and links to an EBSA news release and fact sheet, appeared in an Ascensus Industry & Regulatory News announcement on August 31.)

In the EBSA news release, the agency stated that there have been misunderstandings and confusion surrounding proxy voting and shareholder rights issues, and that the proposed regulations have the overall goal of “ensuring plan fiduciaries execute their ERISA duties in an appropriate and cost-efficient manner when exercising shareholder rights.”

Public comments will be accepted for a 30-day period, ending October 5, 2020.

DOL Issues Proposed Regulation on Proxy Voting and Shareholder Rights

The Department of Labor’s Employee Benefits Security Administration has released a pre-publication version of a proposed regulation intended to govern shareholder rights and proxy voting by fiduciaries of ERISA-governed retirement plans. Securities held as investments in retirement plans may have certain shareholder voting rights, and fiduciaries to such plans may, within certain parameters, exercise those voting rights on behalf of—by “proxy”—for the participants within whose accounts these securities are held.

It is EBSA’s intention that this proposed regulation clarify a fiduciary’s duties of prudence and exclusive purpose with respect to a plan’s participants and the investments they hold, in matters of proxy voting and exercising of other shareholder rights. These proposed regulations will amend an existing investment duties regulation that has been in place since 1979. Other sub-regulatory guidance on this subject has also been issued during the intervening period.

In a news release accompanying this proposed regulation, the agency states that there have been misunderstandings and confusion surrounding proxy voting and shareholder rights issues, and that the proposed regulation has the overall goal of “ensuring plan fiduciaries execute their ERISA duties in an appropriate and cost-efficient manner when exercising shareholder rights.” A fact sheet has also been released.

Public comments will be accepted for a 30-day period following publication in the Federal Register.

DOL Announces Public Hearing on Proposed Investment Advice Prohibited Transaction Exemption

The Department of Labor’s Employee Benefits Security Administration (EBSA) has announced a September 3 public hearing on its proposed prohibited transaction exemption for investment advice fiduciaries, guidance officially known as the Improving Investment Advice for Workers and Retirees exemption. The EBSA announcement notes that the guidance is intended to “provide relief that is broader and more flexible than the Department’s existing exemptions.” Also, EBSA states that the “proposed exemption would also provide regulatory certainty and streamline requirements as investment advice fiduciaries could comply with one exemption for a variety of different types of transactions.”

In consideration of the coronavirus (COVID-19) pandemic, the public hearing will be virtual (conducted remotely), with no in-person presentations. Furthermore, testimony will be limited to those who submitted comments during the public comment period that began with the July 7, 2020, publication of the guidance in the Federal Register, and ended August 6, 2020. Requests to present testimony at the public hearing must be submitted to the agency by August 28, 2020.

Washington Pulse: The DOL’s New Proposal to Regulate Investment Advice

Few aspects of retirement plan governance have been as controversial as regulating investment advice. Exactly what obligation—if any—does an investment professional have to provide impartial, conflict-free advice to savers and retirees?  When do financial professionals step over the boundary that can make them a fiduciary, with the ethical and legal obligations that come with this duty?

The answers have been inconsistent, stretching over many years. Department of Labor (DOL) fiduciary investment advice regulations date back to the 1970s. Those regulations needed revision in order to better align with today’s investment products and participant-directed retirement plans. Changes were proposed in 2010, withdrawn in response to public comments, revised again in 2015, and made final in 2016.

The DOL delayed implementing the 2016 final investment fiduciary regulations and accompanying guidance. These regulations were ultimately struck down in 2018 as “regulatory overreach” by the United States Court of Appeals for the Fifth Circuit.

The DOL later issued Field Assistance Bulletin (FAB) 2018-02, which states that the DOL will not pursue prohibited transaction claims against fiduciaries who make good-faith efforts to comply with the Impartial Conduct Standards (discussed later). FAB 2018-02 remains in effect.

The DOL has again issued investment advice guidance, this time to replace the guidance struck down by the appellate court. This latest guidance package includes a proposed prohibited transaction class exemption entitled Improving Investment Advice for Workers and Retirees, and a technical amendment to DOL Regulations (Regs.) 2509 and 2510 that implements the appellate court’s order by

  • reinstating the original version of DOL. Reg. 2510.3-21 (including the five-part test);
  • removing prohibited transaction exemptions (PTEs) 2016-01 (the Best Interest Contract Exemption) and 2016-02 (the Class Exemption for Principal Transactions);
  • returning PTEs 75-1, 77-4, 80-83, 83-1, 84-24, and 86-128 to their original form; and
  • reinstating Interpretive Bulletin (IB) 96-1, which is intended to help investment providers, financial institutions, and retirement investors determine the difference between investment education and investment advice. Investment providers and financial institutions may rely on the safe harbors in IB-96-1 in order to avoid providing information that could be construed as investment advice.

The technical amendment became effective on July 7, 2020.


What is the five-part test?

The original version of DOL Reg. 2510.3-21 (which the technical amendment reinstates) contains a five-part test that is used to determine fiduciary status for investment advice purposes. Under the test, an investment provider or a financial institution that receives a fee or other compensation is considered a fiduciary if it meets all of the following standards (i.e., prongs) of the test.

  • The provider or institution gives advice on investing in, purchasing, or selling securities, or other property.
  • The provider or institution gives investment advice to the retirement investor on a regular basis.
  • Investment advice is given pursuant to a mutual agreement or understanding with a retirement plan or its fiduciaries.
  • The retirement investor uses the advice as a primary basis for investment decisions.
  • The provider or institution provides individualized advice, taking into account the plan’s demographics, needs, goals, etc.


Has the DOL’s opinion changed on rollover recommendations?

In the preamble of the proposed PTE, the DOL clarified that it no longer agrees with the guidance originally provided in Advisory Opinion 2005-23A (better known as the Deseret Letter). In the Deseret Letter, the DOL indicated that a recommendation to distribute and roll over retirement plan assets would not generally constitute investment advice because it would not meet the first prong of the five-part test. But because it is common for the investments, fees, and services to change when the decision to roll over assets is made, the DOL now believes that a recommendation to distribute assets from an IRA or an ERISA-covered plan would be considered investment advice with respect to the first prong of the five-part test.

The DOL acknowledges that advice encouraging an individual to roll over retirement plan assets may be an isolated and independent transaction that would fail to meet the second “regular basis” prong. But determining whether advice to roll over assets meets the “regular basis” prong depends on the facts and circumstances.  So the DOL could view a rollover recommendation that begins an ongoing advisory relationship as meeting the “regular basis” prong.

As discussed above, the proposed PTE would allow investment professionals to receive compensation for advising a retirement investor to take a distribution from a retirement plan or to roll over the assets to an IRA. The investment professional could also receive compensation for providing advice on other similar transactions, such as conducting rollovers between different retirement plans, between different IRAs, or between different types of accounts (e.g., from a commission-based account to a fee-based account).

Under the proposed PTE, financial institutions would need to document why the rollover advice was in the retirement investor’s best interest. Documentation would need to

  • explain whether there were other alternatives available (e.g., to leave the assets in the plan or IRA and select different investment options);
  • describe any applicable fees and expenses;
  • indicate whether the employer paid for some or all of the plan’s administrative expenses; and
  • show the different levels of services and investments available.

In addition, investment providers or financial institutions that recommend rolling over assets from another IRA or changing account types should consider and document the services that would be provided under the new arrangement.


Who is covered under the proposed PTE?

The proposed PTE would apply to registered investment advisers, broker-dealers, banks, and insurance companies (financial institutions), and their employees, agents, and representatives (investment professionals) that provide fiduciary investment advice to retirement investors. The proposed PTE would also apply to any affiliates or related entitites.

“Retirement investors” include

  • IRA and plan fiduciaries (regardless of plan size),
  • IRA owners or beneficiaries, and
  • plan participants or beneficiaries with authority to direct their accounts or take distributions.

The proposed PTE defines a “plan” as including 401(a) plans (e.g., 401(k) plans), 403(a) plans, 403(b) plans, defined benefit plans, owner-only plans, simplified employee pension (SEP) plans, and savings incentive match plan for employees of small employers (SIMPLE) plans. The proposed PTE would also apply to employee welfare benefit plans that have established a trust (e.g., VEBAs).

The proposed PTE, defines an “IRA” as an individual retirement account, an individual retirement annuity, a health savings account (HSA), an Archer medical savings account (MSA), and a Coverdell education savings account (ESA).


What protection does the proposed PTE offer?

The Internal Revenue Code and ERISA generally prohibit fiduciaries from receiving compensation from third parties and compensation that varies based on investment advice provided to retirement plans and IRAs. Fiduciaries are also prohibited from selling or purchasing their own products to retirement plans and IRAs (known as principal transactions).

Under the proposed PTE, financial institutions and investment professionals providing fiduciary investment advice could receive payments (e.g., commissions, 12b-1 fees, and revenue sharing payments) that would otherwise violate the prohibited transaction rules mentioned above. For example, the exemption would provide relief from prohibited transactions that could occur if a financial institution or investment professional

  • advises a client to take a distribution or roll over assets to an IRA or retirement plan;
  • provides recommendations to acquire, hold, dispose of, or exchange securities or other investments; or
  • recommends using a particular investment manager or investment advice provider.

In addition, the proposed PTE would cover riskless principal transactions  (e.g., when a broker-dealer purchases a security for their own account knowing that it will be sold to a retirement investor at a certain price) as well as principal transactions involving certain specific types of investments (e.g., municipal bonds).

The following transactions would not be covered by the PTE.

  • Transactions where advice is provided solely through a computer model without any personal interaction (i.e., robo-advice arrangements).
  • Transactions in which the investment professional is acting in a fiduciary capacity other than as an investment advice fiduciary under the five-part test, as described below (e.g., a 3(38) investment manager with authority to make discretionary investment decisions).
  • Transactions involving investment providers, financial institutions, and their affiliates if they are the employer of employees covered by the plan; or are a named fiduciary, plan administrator, or affiliate who was chosen to provide advice by a fiduciary who is not independent of the investment professional, financial institution, or their affiliates.

Certain individuals and institutions (and all members within the institution’s controlled group) would be ineligible to rely on the exemption—including those who have been convicted of a crime associated with providing investment advice to a retirement investor, or those who have a history of failing to comply with the exemption. The period of ineligibility would generally be 10 years, but a financial institution with a conviction may petition the DOL for continued reliance on the exemption.


What does the proposed PTE require?

To take advantage of the relief provided under the proposed PTE, investment professionals and financial institutions must provide advice in accordance with the Impartial Conduct Standards. The Impartial Conduct Standards contain three components—a reasonable compensation standard, a best interest standard, and a requirement that prohibits investment providers or financial institutions from giving misleading statements about investment transactions or other related matters.  The Impartial Conduct Standards also requires financial professionals and financial institutions to provide the best execution possible when completing security transactions (e.g., completing the transaction timely).

Under the best interest standard, investment professionals and financial institutions are not required to identify the best investment for the retirement investor, but any investment advice given must put the retirement investor’s interests ahead of the interests of the investment professional, financial institution, or their affiliates. This is consistent with the SEC’s Regulation Best Interest.

Investment providers and financial institutions cannot waive or disclaim compliance with any of the proposed PTE’s conditions. Likewise, retirement investors cannot agree to waive any of the conditions. In addition, the proposed PTE would require a financial institution to

  • provide the retirement investor—before the transaction takes place—with an acknowledgment of the institution’s fiduciary status in writing, and a written description of the service to be provided and any material conflicts of interest;
  • adopt and enforce policies and procedures designed to discourage incentives that are not in the retirement investor’s best interests and to ensure compliance with the Impartial Conduct Standards;
  • maintain records that prove compliance with the PTE for six years; and
  • conduct a review at least annually to determine whether the institution complied with the Impartial Conduct Standards and the policies and procedures created to ensure compliance with the exemption. Although an independent party does not need to conduct the review, the financial institution’s chief executive officer (or the most senior executive) must certify the review.

Note that the proposed PTE would not give retirement investors new legal claims (e.g., through contract or warranty provisions) but rather would affect the DOL’s enforcement approach.


Next Steps

Many investment advisers, broker-dealers, banks, and insurance companies that will be affected by the proposed PTE currently operate under similar standards found in various state laws and in the SEC’s Regulation Best Interest.  The DOL’s temporary enforcement policy discussed in FAB 2018-02 also remains in effect, as do other more narrowly tailored PTEs.

Each type of investment provider and financial institution is likely affected differently, whether in steps to comply or costs involved. Financial institutions and investment providers may want to review the proposed PTE and start taking steps to comply with it. This may involve creating and maintaining any policies and procedures they don’t already have in place as a result of state law or the Regulation Best Interest.

In the meantime, a 30-day comment period for the proposed PTE starts on July 7, 2020. Comments may be submitted at The Docket ID number is EBSA-2020-0003.



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DOL Investment Advice Guidance Published in Federal Register

Today’s Federal Register contains the Department of Labor’s (DOL’s) Employee Benefits Security Administration (EBSA) proposed guidance announced by the agency on June 29, 2020, entitled Improving Investment Advice for Workers and Retirees Exemption.

This guidance is meant to replace the DOL’s 2016 final regulations and accompanying exemptions regarding fiduciary investment advice, which—after several implementation delays—were vacated (struck down) as “regulatory overreach” by the U.S. Fifth Circuit Court of Appeals in 2018. Written comments or requests for a public hearing on this new EBSA guidance must be submitted by August 6, 2020.

Accompanying this EBSA proposed exemption is a second “vacatur” document that officially implements the Court’s vacating of the 2016 EBSA guidance, and reinstates earlier guidance that had been superseded by it.

DOL Issues Guidance on Investment Advice for Workers, Retirees to Replace Vacated 2016 Regulations and Exemptions

The Department of Labor’s (DOL’s) Employee Benefits Security Administration (EBSA) has released a guidance package entitled Improving Investment Advice for Workers and Retirees Exemption. The guidance package includes a News Release, Fact Sheet, Proposed Class Exemption, and a Technical Amendment.

This guidance, to a greater or lesser degree, is meant to replace the DOL’s 2016 final regulations and accompanying exemptions on fiduciary investment advice. After several implementation delays, that 2016 guidance was struck down as “regulatory overreach” by the U.S. Fifth Circuit Court of Appeals in 2018.

DOL Issues Regulations Prescribing Conditions for ESG Investments in Retirement Plans

The Department of Labor’s Employee Benefits Security Administration (EBSA) has issued proposed regulations intended to govern the use of so-called “socially responsible” investments in retirement plans. Investments considered to have these characteristics are officially called environmental, social, and governance (ESG) investments. This guidance is being widely viewed as advising greater caution when retirement plan fiduciaries consider ESG investments for their retirement plans.

In general terms, ESG investments involve investment strategies that take into account environmental, social, and governance factors. Investors in such funds or strategies may do so with the motive of investing in entities that—for example—are considered environmentally responsible, or that support certain social causes.

EBSA has a history of issuing sub-regulatory guidance on the use of ESG investments as options for retirement plans, because of employers’ fiduciary obligation to administer their plans in a manner that places the interests of participants and their beneficiaries above other considerations. Prior EBSA guidance has generally taken the form of Interpretive Bulletins, the latest being IB-2016-1.

EBSA policy towards ESG investments in retirement plans has tended to reflect the philosophy of the administration in power. IB 94-2, issued during President Bill Clinton’s administration, asserted that—while selecting investments to achieve social objectives does not justify inferior returns for plan participants and beneficiaries, considering ESG factors was acceptable as a “tie-breaker” in investment selection.

IB-94-2 was viewed by the succeeding administration of President George Bush as unduly encouraging fiduciaries to include social, environmental, or political considerations in plan investment decisions, and it was replaced by IB 2008-2. To continue the swing of the pendulum, IB-2015-1 and IB-2016-1—issued during President Barack Obama’s administration—expressed an intention to revert to the less cautionary tone of EBSA’s guidance issued under President Clinton.

Now, under President Donald Trump’s administration, EBSA has gone beyond sub-regulatory Interpretive Bulletins by issuing proposed regulations. Public comments will be accepted for a 30-day period following the guidance’s publication in the Federal Register. Elements of these proposed regulations in prepublication form, and as articulated in an EBSA news release, include the following.

  • Fiduciaries may not invest in an ESG if they understand that its underlying investment strategy would give less priority to investment returns, or would increase investment risk, for the sake of a nonfinancial objective.
  • Compliance with ERISA’s exclusive-purpose and loyalty duties prohibits fiduciaries from subordinating the interests of plan participants and beneficiaries in retirement income and financial benefits under the plan to nonfinancial goals.
  • The regulations describe required investment analysis and documentation for what EBSA describes as “the rare circumstances” when fiduciaries are choosing among investments that are truly “indistinguishable” from one another—investments essentially equal—from an economic standpoint.
  • The proposed regulations state that “The Department does not believe that investment funds whose objectives include non-pecuniary [i.e., ESG] goals …even if selected by fiduciaries only on the basis of objective risk-return criteria…should be the default investment option in an ERISA plan.”



SEC Issues Reminder of June 30 Deadline for Compliance with Broker-Dealer Reg BI Conduct Standards

In an announcement Monday, the Securities and Exchange Commission (SEC) again confirmed that June 30, 2020, is the deadline to comply with the agency’s Regulation Best Interest (Reg BI), and requirements to provide new Form CRS, Relationship Summary, to retail customers. In early April, the SEC issued a similar reminder. Reg BI was officially adopted by the SEC in June 2019, with a delayed compliance date of June 30, 2020.

Reg BI is intended to govern relationships between retail investors and the broker-dealers and “associated persons” with whom they deal. In addition to adhering to the principles in Reg BI—chief among them that “investment professionals should not put their interests ahead of the interests of their clients and customers”—there is a requirement to provide a new Form CRS, which includes general information about the investment firm, services the client will be receiving, and how the client will be charged for those services. Form CRS is also to be filed with the SEC.

In April, SEC Chairman Jay Clayton stated that “firms should continue to make good faith efforts around operational matters to ensure compliance by June 30, 2020, including devoting resources as necessary and available in light of the circumstances,” a reference to the uncertainties cause by the coronavirus (COVID-19) pandemic.

In this week’s announcement, Clayton noted that “our work across the Commission over the past several months has strengthened my view that the effects of the COVID-19 pandemic weigh substantially in favor of implementing the Reg BI and Form CRS requirements as soon as practicable.”

SEC Reveals Focus of Examinations for Compliance with Regulation Best Interest

The Securities and Exchange Commission (SEC) continues to share information on its plans to gauge compliance with Regulation Best Interest (Reg BI), the soon-to-be-effective SEC guidance intended to govern relationships between retail investors and broker-dealers.

Initial insight was provided in a public statement issued on Thursday, April 2, when SEC Chairman Jay Clayton confirmed that the June 30, 2020, compliance date for Reg BI would not be postponed, despite business disruptions as the nation deals with the coronavirus (COVID-19) pandemic.

The overarching principle of Reg BI is that investment professionals should not put their interests ahead of their clients’ and customers’ interests. In tandem with Reg BI is a requirement to provide a new Form CRS, Relationship Summary, with information on the investment firm, services a retail client will be receiving, and how a client will be charged for those services.

In a press release issued Tuesday, April 7, the SEC’s Office of Compliance Inspections and Examinations (OCIE) offered more detail on the focus of its examinations of compliance with Reg BI and new Form CRS. Examinations will look for the following.

  • Evidence that there has been a good faith effort to implement policies and procedures to comply with Reg BI
  • Evidence that the broker-dealer has made a good faith effort to comply with new Form CRS requirements, including filing Form CRS with the Department of Labor, and delivering to existing and new investors

The OCIE news release noted that compliance examinations would be “taking into account firm-specific effects from disruptions caused by COVID-19.”