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Dedicated Client Advocacy

New DOL Rule Seeks to Protect Retiree Savings

In the shadow of the Center for American Progress, Secretary of Labor Thomas Perez announced that "putting clients first" would no longer just be a "marketing slogan." He was referring to the game-changing regulations the Department of Labor recently proposed that created new standards that stockbrokers needed only to provide "suitable" recommendations. While that may seem sufficient on its face, critics pointed out that it encouraged advisers' lamentable conduct, such as favoring investments that entitled them to higher commissions. The new rule, which is much stronger than that which preceded it, requires brokers that provide retirement advice to work in their client's best interest.

The rule initially met scathing criticism from brokerages across the country. Over 3,000 public comments were lodged with the Department of Labor after the preliminary draft of the rule was released in April. Secretary Perez said the agency adjusted to the complaints and crafted a rule with several concessions to appease brokerage firms, like Cetera Financial Group. Cetera opposed the rule initially, but said that the final rule showed that the Department of Labor was willing to listen to some of the criticisms from brokerage firms.

Plaintiffs' firms are happy with the new rules. For many years, ambiguity has shrouded what it means to be a fiduciary. This new rule will bring confidence where there previously was uncertainty. Brokers will be able to collect money from sales as long as they acknowledge their fiduciary duty to clients and disclose conflicts of interest. Therefore, there is no longer an argument as to whether brokers are fiduciaries - they will be required to announce it. Moreover, raising the standard from "suitable" to "best interest" only enlarges the catalog of claims that investors can bring against unscrupulous investors.

Democratic lawmakers were quick to applaud the Obama administration's initiative. One of the fiercest proponents of the regulation, Senator Elizabeth Warren (D-MA), said "Sometimes government works for the people and today was one of those days."

The legal team at SFMS has substantial experience litigating employment matters. If you have any questions regarding this subject or this posting, please contact Alec Berin ([email protected]) or Chiharu Sekino ([email protected]). We can also be reached toll-free at (866) 540-5505.

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