“As a lawyer that scares me, and it scares me for a couple reasons. One, lawsuits, arbitrations, government investigations don’t happen the next day. They happen like two years later, and one of the things they’re going to ask for is a copy of the specific reasons,” he said.
“Another concern I have is, are the specific reasons firms use to justify rollovers too generic? They’re supposed to be individualized to each participant, based on the participant’s or IRA owner’s investment profile,” the attorney said.
According to Reish, other types of failures he is seeing include the following:
• A failure to provide retirement investors with a fiduciary acknowledgement.
• A failure to have policies and procedures to blunt the risk of conflicts of interest for both the firm and its advisors.
• A failure to disclose that plan-to-IRA rollover recommendations and IRA-to-IRA transfer recommendations are conflicts of interest.
The DOL said that the agency will not deem it a violation if there are no investment losses, but a firm or advisor must make the investor whole if there are losses.
“I think if a firm has made a mistake and goes through the self-correction process and reports to the DOL, I don’t think there will be any adverse consequences to that,” said Reish.
“But my sense is if the DOL comes in and a firm has made no effort or only a half-hearted effort to comply—for instance, they don’t have policies and procedures in place, or there are just major, major holes in their compliance—I don’t think [the DOL] will be sympathetic, even though this is the first year of the rule,” he said.