The Department of Labor has revealed its new fiduciary duty rules for broker-dealers who advise investors, including the easing of several contested measures that may appease members of the securities industry who opposed the fiduciary duty rules.
What Will the Final Fiduciary Rule Include?
As expected, the rules will require financial professionals to act in their client’s best interest when recommending investments. Prior to the fiduciary rule, broker-dealers were only required to make sure that recommended investments are “suitable” for the investor. Now, broker-dealers and brokers will be required to act in clients’ best interests.
The rules also specify a way for brokers to earn commissions and engage in revenue-sharing for sales of investment products, as long as the broker-dealer enters into a contract agreeing to act in the best interest of the client. This “best interest contract exemption” allows brokers to collect commissions from sales of any recommended investments, including real estate investment trusts and listed options, among others.
Under the new rules, a broader class of plan sponsors will be exempted from owing the new heightened fiduciary duty. For example, investment recommendations to plan sponsors that manage more than $50 million in assets (instead of the $100 million set forth in earlier versions of the proposed rules), will not be subject to the rules, as long as certain conditions are met.
Finally, the Department of Labor is extending the time frame to implement the new rules, taking partial effect in April 2017, with full implementation by January 2018.
Did Your Broker-Dealer Break the Fiduciary Rule?
The attorneys at Dimond Kaplan & Rothstein, P.A. have recovered more than $100 million from banks and brokerage firms for their wrongful actions. If you were recommended unsuitable investments from your broker or brokerage firm and if a broker or brokerage firm failed to act in your best interest, you may have certain legal rights that require your immediate attention. Contact us to schedule an appointment or consultation today.