The Alternative & Direct Investment Securities Association, a trade association representing the non-traded alternative investment industry, commented on Secretary of Labor Alexander Acosta’s Wall Street Journal op-ed that was published on Monday, where Acosta confirmed that the DOL’s fiduciary rule will become applicable June 9, 2017, with full implementation on January 1, 2018.
As reported by The DI Wire yesterday, Secretary Acosta said that there is no legal basis to further delay the rule while it is under review by the DOL, citing the requirements of the Administrative Procedure Act. Acosta also noted that he hopes that the Securities and Exchange Commission will participate in the rule making process in the future.
“While our members are disappointed that the Department has not yet completed its review of the fiduciary rule and accompanying exemptions as directed by the Trump administration, we all recognize the need for the Department (as well as all government departments and agencies) to comply fully with the Administrative Procedure Act in considering changes to any current rule or regulation,” said ADISA president John Grady, DLA Piper.
ADISA has advocated to further delay the rule and opposes the rule in its current form, believing that it may harm lower income retirement savers – the very demographic the regulation seeks to protect.
“In our view, the rule was not founded on adequate research into the effects of so-called ‘conflicted advice’,” said ADISA. “We continue to believe that the rulemaking process and retirement savers generally would benefit greatly from a new and close review of the purported economic harm caused by such advice and the likely harm that the new rule will visit upon such savers who might lose access to financial advice under the new rule.”
The DOL issued a field assistance bulletin that described its temporary enforcement policy related to the fiduciary rule, and will not pursue claims against fiduciaries who are working diligently and in good faith to comply with the fiduciary rule and exemptions, or treat those fiduciaries as being in violation of the fiduciary rule and exemptions.
The DOL also published a list of frequently asked questions where it reiterated its earlier decision to scale back some aspects of the “best interests contract” exemption through the end of 2017.
As confirmed in the FAQs, the standard for financial advisors who are fiduciaries under the amended and soon-to-be-effective rule cannot accept otherwise prohibited compensation in connection with an investment recommendation unless: (i) the advice they give is in the best interest of the retirement investor, which requires that the advisor exercise appropriate care in making his/her recommendation and that the recommendation be in the best interest of the client and not the advisor or his/her firm; (ii) the advisor charges no more than reasonable compensation; and (iii) the advisor makes no misleading statements about the recommendation, his or her compensation and/or any conflicts of interest.
“The rule, as written, could diminish the availability of professional, personalized advice investors depend on for retirement and savings needs,” said ADISA’s legislative & regulatory committee vice chair Larry Sullivan, Passco Companies. “ADISA will work with our members to ensure that all involved understand their responsibilities under the revised rule and accompanying exemptions, and will continue to work with the Department, Congress and the SEC to ensure that all applicable rules and regulations create a level playing field for financial professionals and serve the best interests of retirement savers.”
ADISA said that it is planning educational sessions and activities on the upcoming rule implementation in its upcoming summer and fall events.
The Alternative and Direct Investment Securities Association bills itself as the largest national trade association serving alternative investment and securities industry professionals who are active in offering, managing and distributing private and public direct investments. ADISA’s members are typically involved in non-traded real estate investment trusts, business development companies, master limited partnerships and private and public funds, 1031 exchange programs, energy and oil and gas interests, equipment leasing programs, or other alternative and direct investment offerings. The association was founded in 2003 and has approximately 4,500 members.