Few realms in the meetings world are as complex and regulated as the financial/insurance sector. So, when a major governing regulation is tweaked, planners take notice.
The latest wrinkle is the so-called fiduciary or conflict-of-interest rule, created to protect individual retirement investments and funds, which has some bearing on how incentives are structured. In a recent turn of events, this rule will no longer be enforced by the U.S. Department of Labor. Oversight is expected to fall -- eventually -- to another federal body: the Securities and Exchange Commission.
Following is a closer look at this ever-morphing issue and the ways it affects how financial firms incentivize brokers and agents.
In the beginning
The Department of Labor unveiled its intended fiduciary rule in April 2016. The measure went through several starts and stops, including when President Trump, just weeks into office, issued a memorandum to delay implementation while the DOL carried out further analysis. A transition period for implementation began in April 2017, and the measure finally took full effect on Jan. 1 of this year.
This federally mandated regulation states that financial advisers, consultants, brokers and agents (aka fiduciaries) who sell or offer advice on retirement products must be able to prove that they acted in their clients' best interest. This means they must disclose any fees or incentives they received for recommending particular products.
This past March, however, the 5th Circuit Court of Appeals ruled that the DOL overstepped its authority by creating the measure. In response, the federal agency issued a scaled-back temporary enforcement policy in acknowledgment of the jurisdiction question. However, industry and legal experts familiar with the issue, including M&C contributor Jonathan T. Howe, president and senior and founding partner of law firm Howe & Hutton, expect the DOL to drop enforcement completely.
That doesn't mean the fiduciary rule will go away: The SEC is now considering issuing its own regulation, which could apply more broadly to all individuals' banking and investment accounts, not just retirement accounts that were covered in the DOL measure.
"I don't think the industry is off the hook," says Steve Bova, executive director of Financial & Insurance Conference Professionals. "There have been whispers for a long time that this belongs to the SEC and not the DOL. We imagine the SEC will instill similar regulations over the financial/insurance industry, same as the federal government has done over the pharma industry."
