Page 42 - Investment Advisor April/May 2023

COMPLIANCE COACH

By Thomas D. Giachetti

Are You Ready for the DOL’s Next Fiduciary Deadline?

Investment advisors must fulfill the latest requirements by July 1.

he Labor Department’s fiduciary- The methodology and results of the
rule requirement rollout contin- retrospective review must be reduced to a
Tues with the fast-approaching written report. The written report must:
July 1, 2023, filing date for an investment • Describe the policies and procedures
advisor’s initial retrospective review. in place at the investment advisory that
While we anticipate assisting many invest- ensure compliance with the requirements
ment advisors throughout the country of the Impartial Conduct Standards;
with their completion of this new require- • Explain violations of the invest-
ment, it’s important to understand its pur- ment advisor’s compliance policies and
pose and components. For this reason, I procedures during the review period,
asked my colleague Joseph Antonakakis including a description of the issue, how
to share his expertise in this area. Senior executive officers, such as the issue was detected and how the
The retrospective review requirement the investment advisor’s chief compli- issue was remediated; and
of Prohibited Transaction Exemption ance officer, should carefully review the • Disclose whether any self-correc-
2020-02 (PTE) for rollovers is designed report before making the required certi- tions were required, as discussed below,
to assist in detecting and preventing vio- fications so that they can make the certi- as well as how the policies and proce-
lations of — and achieving compliance fications with confidence. This ensures dures were modified, if at all.
with — the Impartial Conduct Standards that the investment advisor, through an The written report should be pro-
and the policies and procedures adopted appropriate executive officer, is fully vided to one of the investment advisor’s
for compliance with the PTE. accountable for the retrospective review. senior executive officers, who must then
Compliance with the standards of the The retrospective review must assess make certain certifications related to
PTE is achieved by: whether the investment advisor fol- their review of the report. These certifi-
• Providing investment advice that is lows the best interest standard of care, cations include:
in the retirement investor’s best interest, receives only reasonable compensation • The senior executive officer has
• Charging reasonable compensation, and is satisfying the SEC’s best execu- reviewed the report of the retrospective
• Avoiding materially misleading tion standard. review;
statements about the recommended In addition, advisors must not make • The financial institution has in
investment transaction and other materially misleading statements related place policies and procedures prudently
relevant matters, to recommendations; they should make designed to achieve compliance with the
• Seeking to obtain the best execu- required disclosures prior to engaging conditions of the exemption; and
tion of the investment transaction in a recommended transaction, establish • The financial institution has in
reasonably available under the circum- and enforce policies and procedures, and place a prudent process to modify such
stances, as required by the federal secu- complete the retrospective review report. policies and procedures as business,
rities laws; and The retrospective review, report and regulatory and legislative changes and
• Self-correcting any violation within certification must be completed at least events dictate, and to test the effective-
90 days and furnishing notification to the annually and no later than six months ness of such policies and procedures on
DOL within 30 days of the correction. following the end of the period covered a periodic basis, the timing and extent of
The DOL expects advisors to use by the review. A review covering the which is reasonably designed to ensure
the results of the review to find more calendar year 2022 must be completed continuing compliance with the condi-
effective ways to help ensure that by or before July 1, 2023. tions of the exemption.
investment professionals are providing The investment advisor must retain the
investment advice in accordance with report, certification and supporting data Thomas D. Giachetti is chairman of the
the Impartial Conduct Standards and for six years and provide these documents Investment Management and Securities
to correct any deficiencies in existing to a DOL or Internal Revenue Service offi- Practice Group of Stark & Stark. He can be Adobe Stock
policies and procedures. cial within 10 business days of a request. reached at [email protected].

40 INVESTMENT ADVISOR APRIL/MAY 2023 | ThinkAdvisor.com