Investors Capital Corp. is partnering with Fee Disclosure Advisory Services LLC to prepare its advisors to meet the new retirement plan disclosure regulations that go into effect July 1.
"Most broker-dealers are unaware of the exposure they have to conform to the new regulations" and they do not have much time to do so, says Michael Callahan, principal of Fee Disclosure Advisory Services.
The new rules, known as 408(b)(2), come from the U.S. Department of Labor under Erisa, rather than the SEC or Finra, so some broker-dealers may not realize the extent of the compliance involved, he says. Erisa (the Employee Retirement Income Security Act of 1974) sets minimum standards for retirement and health benefit plans in private industry.
New regulations require employer-sponsored retirement plan providers to disclose fees and the services that are being provided to plan sponsors and participants. Providers also must disclose if they are operating in a fiduciary status and how much they are charging for these services.
Investors Capital, an independent broker-dealer subsidiary of Investors Capital Holdings Ltd., is partnering with Fee Disclosure to comply in time, the broker-dealer says. Fee Disclosure Advisory Services develops administrative documentation, procedures, guidelines and standards to meet the new regulations. Firms that are not in compliance with the new regulations will face substantial penalties.
The first step in the compliance process is to perform a firm audit to determine how many advisors sell retirement plans, how many accounts exist and which carriers are being used. Fee Disclosure is working with Investors Capital to develop a customized Web application so that advisors can supply plan-level information so the proper fee disclosure documents can be generated.
Fee Disclosure also is working with Investors Capital to develop a ticketing system for advisors to complete so the broker-dealer can maintain an accurate auditing system.
"We now have the tools to assess our retirement plan assets and to ensure that our advisors will be able to comply with the effective date of July 1," says John Cataldo, Investors Capital's chief compliance officer