Approach Fiduciary Rule 3.0 and PTE 2020-02 with a Long-term Lens

December 20 is just around the corner, which means time is quickly running out to meet compliance for PTE 2020-02.

In preparation for the looming deadline, InvestorCOM recently hosted a roundtable event “Preparing for PTE 2020-02” to address the industry’s questions and concerns, and to share approaches firms are taking to meeting compliance.

One interesting insight gathered from the roundtable is to approach compliance with the fiduciary rule with a long-term lens.

Across the US, firms are at different states of readiness for compliance deadline. In October 2021, the DOL amended the original deadline of December 20 2021, to now require that firms have the proper processes by January 31, 2022, and documentation and disclosure in place by June 30, 2022.

Some firms have been planning for compliance for some time, while others have only recently become aware of the impact that this rule will have on their processes. A poll conducted prior to the event found that firms are very divided. While 50% of firms state that they are almost ready to meet the new requirements, the other 50% state that they are just getting started.

It’s clear that best interest-type regulations are here to stay, so firms should think strategically about how they create compliance processes that meet today’s requirements while also supporting organizational agility in the face of future regulatory changes.

Updated policies and procedures will need to be rolled out to employees in the field. Employees will require training to ensure they are engaging with new processes correctly – for example, the new rules will require several new assessments to be completed. This training can’t be a one-time event. New employees will need initial training, and the training will need to be refreshed as the rules evolve.

Feedback on SEC Reg BI examinations suggests that examiners want to see documented, repeatable processes for assessing reasonable alternatives when making recommendations. Firms cannot treat a conflict review as a one-time project. Instead, they need to have a mechanism for updating the review when clearing contracts change, the tech stack is altered, new products are launched, or rules are updated. Also, firms need to review and update disclosure and mitigation of conflicts over time. Firms should think along similar lines when creating compliance processes for the Fiduciary Rule 3.0.

Considering these pressing regulatory requirements, it will be prudent for firms to invest in scalable compliance technology that support their Reg BI and Fiduciary Rule 3.0 processes today and in the future. Creating sustainable processes within firms for meeting these regulatory obligations is likely to have one of the most significant compliance ROIs over the next three years.


Read more insights captured from the roundtable event, “Preparing for PTE 2020-02”.

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