Department of Labor (DOL) Fiduciary Rule

Transcription

1 Department of Labor (DOL) Fiduciary Rule Insurance & Retirement Services April 2016

2 Fiduciary Rule - Overview Ongoing X X Upfront X X X BICE Artifacts 1. Best Interest Contract (BIC) 2. Transaction Disclosure a. Generic Transaction Disclosure b. On Demand Initial Transaction Disclosure 3. Website Disclosure 4. PTE

3 Primary Differences Data Needs (Post 1/1/18) Area of Concern BIC BICE Initial Transaction Disclosure BICE Annual Client Disclosure BICE Web Disclosure Change from Proposed to Final Bi Party instead of Tri Party but still no product or transaction data, delivered before or at same time as transaction execution Changed into two versions: i. Up Front - Generic with descriptions and legalese but no specific product or transaction disclosures with offer to get specific disclosure, on demand ii. On Demand (up front or after transaction within 30 business days of request) Specific disclosure of costs, fees, and other compensation including Third Party Payments but not in dollars, rather dollar amounts, percentages, formulas, or other means reasonably calculated to present a materially accurate disclosure. (3) includes a link to the FI s website as required by III(b). (4) These disclosures do not have to be repeated for subsequent recommendations by the Adviser and FI of the same product within one y ear of the contract disclosure in II(e), unless there are material changes in the subject of the subject. Removed from Final Rule Lots of descriptions including list of manufacturers and explanations of Third Party Payment arrangements as well as disclosure of compensation and incentive arrangements with Advisers but not adviser-specific arrangements. Above arrangements may be expressed as dollar amounts, percentages, formulas, or other means reasonably calculated to present a materially accurate description of the arrangements. it may disclose reasonable ranges of values, rather than specific values, as appropriate Section III b (1) freely accessible to the public and updated no less than quarterly, a schedule of typical account or contract fees and service charges;, in addition to a link to the signed BIC POS disclosure POS disclosure still required prior to execution (of FAs only) with i. Insurance commissions, expressed to the extent feasible as an absolute dollar figure, or otherwise, as a percentage of gross annual premium payments, asset accumulation value, or contract value, for the first year and for each of the succeeding renewal years, that will be paid directly or indirectly with separate identification of..commission that will be paid to any other person as a GDC, override, or similar payment ii. Statement of any charges, fees, discounts, penalties or adjustments which may be imposed as a result of buy, sell, hold, exchange, termination or sale BICE data dow nload Section IX Removed from Final Rule 3

4 Transition and Grandfathering (4/10/16 1/1/18) Grandfathered Accounts Accounts opened prior to 4/10/16 and earning prohibited compensation; May be grandfathered and serviced, without a BIC, as long as the compensation is not increased as a result of the advice Subsequent additions would invalidate the grandfathering exemption Negative Consent Coverage For BIC-eligible relationships, negative consent may be sent at anytime prior to 1/1/18 along with the Section II(b)-(d) language (including the full II-e disclosure requirements) If not objected within 30 days, BIC is in effect. Section II(b)-(d) language references: Fiduciary Impartial Conduct Standards Warranties 4

5 Transition and Grandfathering (Cont d) Transition Period (4/10/17 1/1/18) Best Interest standard will apply beginning on the Applicability date of 4/10/16 but will not require the full Section II(e) and III disclosures. Section IX of the BICE section states a few disclosures will be required (BIC Light) Section IX language references: In general (prohibiting receiving compensation that varies based on advice; receiving compensation from third parties in connection with their advice) Covered Transactions (permits receiving compensation as a result of advice) Exclusions (the compensation received as a result of investment advice solely by an interactive Web site on computer software-based models, discretionary control) Conditions (in excess of reasonable compensation; a single written disclosure covering multiple transactions occurring within the transition period.) 5

6 DTCC Concept Proposal Support Fees and Expenses Reporting Upfront (Generic and On Demand Initial Transaction R Disclosure) Carrier Generated Product Profile for Annuities (PPfA) Distributor Specific Rules & Commission Schedules Application/Subsequent Premiums (APP/SUB) Ongoing (On Demand & Website Disclosures) Commissions (COM) Financial Activity Reporting (FAR) Position and Valuations (POV) 6

7 Insurance Data Solutions (IDS) Proposed Flow 7

8 I&RS Product & Services Transaction & Website Disclosures Applications/Subsequent Premiums (APP/SUB) BIC Eligibility Indicator Commissions (COM) Additional Commission Basis Reason Codes (CBRC) Financial Activity Reporting (FAR) Additional Fee Fields and Transaction Identifiers Positions and Valuations (POV) New Fee Record, Fee Fund Fields, Service Feature/Rider Fee Fields BIC Eligible Indicator 8

9 Proposed Timelines Functional & Technical Design Build Begins Application, Performance, Pen Testing PSE Release June 2016 Nov 2016 Feb 2017 August 2016 Requirements Gathering Stage 1 Approval* Stage 2 Approval* DTCC Builds Solution Firm Onboarding Production Release * Stage 1 Approval SAB Firms Review Requirements, Approve Requirements, and Commitment to Usage Upon Delivery * Stage 2 Approval SAB Firms Review Functional and Technical Design and Commitment to Usage Based on Functional Design 9

10 QUESTIONS 10