The Future of Fiduciary Standards
Fiduciary standards are alive and well, although they are in a state of transition and confusion. Do we look to the DOL (Department of Labor), SEC (Securities and Exchange Commission), or Individual State Regulators.
Let’s first take a look at the DOL. The Fiduciary rule which was introduced in April 2016 elevated financial professionals who work with retirement plans to act as a Fiduciary. Which is a person or organization that acts on behalf of another person or persons to manage assets. The 5th U.S. Circuit Court of Appeals vacated the [1] DOL’s fiduciary rule in March 2018, saying it represented regulatory overreach. But in its fall regulatory agenda, the [1]DOL said it is “considering regulatory options in light of the (5th) circuit opinion.” [1]
The SEC passed Regulation Best Interest in June 2019. This package of rulemakings and interpretations is designed to enhance the quality and transparency of retail investors’ relationships with investment advisers and broker-dealers, bringing the legal requirements and mandated disclosures in line with reasonable investor expectations, while preserving access (in terms of choice and cost) to a variety of investment services and products.
Currently regulators and legislators in New Jersey, New York, Nevada and Maryland, Connecticut, Massachusetts, California, Missouri, South Carolina, and South Dakota are looking at implementing stricter standards for advisers and brokers operating in their respective jurisdictions.
With all this change and confusion around Fiduciary standards, the DOL working with the SEC and States perusing their own fiduciary regulations. It says one thing clearly to me, there has never been a time where knowledgeable industry professionals and prudent advice has been more essential.
Written by: Todd Rohrer, Client Advisor
These are the opinions of Todd Rohrer and not necessarily those of Cambridge, are for information purposes only, and should not be construed or acted upon as individualized investment advice. Investing involves risk. Depending on the types of investments, there may be varying degrees of risk. Investors should be prepared to bear loss, including total loss of principal. The strategies discussed herein are not designed based on the individual needs of any one specific client or investor. In other words, it is not a customized strategy designed on the specific financial circumstances of the client. However, prior to opening an account, Cambridge will consult with you to determine if your financial objectives are appropriate for investing in the model. You are also provided the opportunity to place reasonable restrictions on the securities held in your account.
[1] U.S. DEPARTMENT OF LABOR 200 Constitution Ave NW, Washington, DC 20210