19.07.2019 02.55 GMT+0000

The SEC’s new Regulation BI relies heavily on increased disclosure of conflicts of interest to protect investors. However, there is research indicating that, where an economic conflict exists increased disclosure makes things worse--not better. This research is worth considering as we assess the implications of these new rules.

Understanding the Impact of Disclosure

Understanding the Impact of Disclosure

Research indicates that disclosing conflicts of interest may not have the desired effects.

SEC rules to protect investors from brokers (with conflicting economic incentives) relies heavily on disclosure of these conflicts. However, some academic research raises questions about the impact of increasing disclosure where parties’ interest may conflict. Significantly, conflicted advisors may provide more biased advice (to offset the impact of the disclosure) and customers may not adequately assess or consider the nature of the conflict.

11.04.2019 07.34 GMT+0000

Plan provider “disclosures” of conflicts of interest do little to protect participants.

Disclosure: A Fox’s Guide to the Henhouse

Disclosure: A Fox’s Guide to the Henhouse

Plan fiduciaries rely on disclosure to protect participants from plan providers whose economic interests conflict with the best interests of participants. This reliance is misplaced.

One of the great challenges facing plans is how to deal with plan providers who have dual loyalties. Conflicted providers represent a significant challenge--and risk--to plan fiduciaries by capitalizing on participant confusion over the role of the financial “advisors” who work for these providers. The most common response is to rely in legal notices and disclosures to “address” concerns over conflicted providers. However, this reliance on legal notices and disclosures needs more careful examination -- especially since the disclosures are prepared by these (conflicted) providers.

27.09.2018 04.19 GMT+0000

Retirement plan fiduciaries should review disclosures from plan providers carefully. Disclosures provided may not be true or false; rather, they may be somewhere in between.

True or False…or Somewhere in Between?

True or False…or Somewhere in Between?

Federal securities law may contain some helpful insights for retirement plan fiduciaries, as they assess disclosures supplied by service providers.

Retirement plan fiduciaries rely on plan providers (such as recordkeepers) for key pieces of information to fulfill the fiduciaries’ legal obligations -- even if those disclosures reveal some unflattering truths about a provider. In assessing representations from providers, plan fiduciaries would benefit from guidance in assessing when and how to push back. Federal securities laws may provide some help in this regard.

11.09.2018 12.42 GMT+0000

Recordkeepers who also sell financial products and services are subject to regulation by the SEC. Recent events indicate that the SEC may fill the void left by DOL inactivity on replacement of the defunct fiduciary rule.

From DOL to SEC and Beyond

From DOL to SEC and Beyond

Will the SEC Play a Larger Role in Retirement Plan Governance?

Events of recent months indicate that a regulatory shift may be occurring. The Department of Labor has gone silent on the conflicts of interest in the financial industry that affect retirement plans, while the Securities and Exchange Commission seems to have taken up the responsibility for addressing these issues.