The Impartial Conduct Standards
Although portions of the DOL Fiduciary Rule have been delayed until June 2019 the Impartial Conduct Standards went into effect on June 9, 2017 and remain in place. The Impartial Conduct Standards are comprised of three key components:
1) Act in the best interest of the client
2) Receive no more than reasonable compensation
3) Make no misleading statements
The DOL has indicated that it will not bring enforcement actions between now and July 1, 2019 against firms and producers who are making "diligent and good faith efforts" to comply. However, DOL Secretary Acosta has publicly reiterated that if companies are not, "...proceeding in good faith..." that the DOL has enforcement authority.
Best Interest of the Client
· The best interest standard is a higher standard than the suitability standard
· Producers must put the interests of the client ahead of the fiduciary's own interests (avoid or mitigate conflicts of interest)
· Receiving compensation is a significant conflict of interest for a fiduciary
· Compensation must be "reasonable" to avoid creating too much of an incentive for the fiduciary to put his/her interests ahead of the client
Make No Misleading Statements
- Statements about the recommended transaction, fees and compensation, material conflicts of interest, and any other matters relevant to the client's investment decisions must not be misleading at the time they are made
- Includes both oral and written statements (e.g., advertising)
Compliance with the Impartial Conduct Standards requires specific actions on your part to ensure you can comply. Contact us to learn more about practical solutions to protect your business.