The Department of Labor has changed the rules governing retirement investment advice, effectively bringing the Employee Retirement Income Security Act (ERISA) of 1975 into the 21st Century and in step with modern financial plans—by requiring conflict of interest reporting.
Although the loopholes and gaps currently pose significant risks related to COI, the new rule applies a fix, establishing the “types of relationships that must exist for such recommendations to give rise to fiduciary investment advice responsibilities.” The DOL also outlines the types of communication which can constitute investment advice.
As part of the Best Interest Contract Exemption, a financial institution is required to “acknowledge fiduciary status for itself and its Advisers… and receive no more than reasonable compensation.” Each financial institution must also “adopt policies and procedures reasonably designed to mitigate any harmful impact of conflicts of interest, and disclose basic information about their conflicts of interest and the cost of their advice.” In-place policies, procedures and COI mitigation strategies must also be displayed on that institution’s website.
Conflict of Interest reporting required, but COI RiskManager can help
COI RiskManager™, Osprey Compliance Software’s innovative software solution for efficiently capturing, tracking and reporting conflict of interest disclosures, can help your institution acknowledge and keep tabs on COI. Not only that, our tool lets you demonstrate to the DOL, your customers and your colleagues that COI is a serious concern, and steps have been taken to address potential risks from the get-go. We give you:
● Complete audit trail allowing for easy and immediate documentation review
● Customizable disclosure forms which can be tailored to recommendations and investment advice, relationships, compensation and clients’ best interests
● Data encryption for sensitive financial information
Get onboard with COI RiskManager™, and stay above board when it comes to compliance.
June 7, 2016 – Rule went into effect
April 10, 2017 – Phase 1 compliance required
January 1, 2018 – Full compliance required
*quotes and details taken from the DOL.