The Briggs Forum on Financial Markets: Securities, Insurance, Litigation and Regulation is Thursday, April 20

The Briggs Forum on Financial Markets: Securities, Insurance, Litigation and Regulation (formerly known as the Upper Midwest Securities Litigation and Enforcement Forum) is Thursday, April 20 at Windows on Minnesota, on the 50th floor of the IDS Center.

Our exceptional lineup of speakers will present on challenges and strategies that affect the financial industry, including securities and insurance regulation and enforcement, cyber security and customer data, and current events and ethical considerations.

The full agenda of speakers and topics is as follows:

8:00 – 8:30 am Registration and Continental Breakfast
8:30 – 8:45 am Welcome: Financial Markets in the New Era
8:45 – 9:15 am Regulatory Priorities in Minnesota
  • Michael J. Rothman, Commissioner,
    Minnesota Department of Commerce
9:15 – 10:15 am DOL Fiduciary Duty Rule: What Now?
  • Nicole James Gilchrist, Senior Counsel, Thrivent Financial
  • Eric L. Marhoun, EVP and General Counsel,
    Fidelity & Guaranty Life Insurance
  • Ambassador Tom McDonald, Partner, BakerHostetler
  • Julie H. Firestone, Briggs and Morgan, P.A. (Moderator)
10:15 – 10:30 am Break
10:30 – 11:30 am Focus on the Regulators: What Can We Expect in Financial Regulation
  • R. Scott DeArmey, District Director, FINRA
  • Paul Mensheha, Regulatory Counsel, SEC
  • Frank A. Taylor, Briggs and Morgan, P.A. (Moderator)
11:30 am – 12:30 pm Networking Lunch (provided)
12:30 – 1:15 pm Current Events and Ethical Considerations
  • Professor Richard W. Painter,
    University of Minnesota Law School
1:15 – 2:15 pm An Aging Population: Elderly Clients and Clients with Diminished Capacity
  • Melissa J. Morris, Special Care Planner,
    Minneapolis Financial Group
  • Anita Raymond, LISW, CMC,
    Volunteers of America
  • Andrea Smith, Corporate Counsel, Wells Fargo
  • Robert A. McLeod, Briggs and Morgan, P.A. (Moderator)
 2:15 – 2:30 pm Break
 2:30 – 3:15 pm Managing the Inside/Outside Counsel Relationship
  • Margaret A. Goetze, Associate General Counsel,
    RBC Wealth Management
  • Jen Randolph Reise, AVP Corporate Compliance and Ass’t Corporate Secretary, Regis Corporation
  • Eric J. Rucker, Senior Counsel, 3M
  • Scott G. Knudson, Briggs and Morgan, P.A. (Moderator)
3:15 – 4:15 pm The New Great Train Robbery: Cyber Security and Protecting Customer Data
  • James C. Browning, Jr., Deputy General Counsel and VP, Stifel, Nicolaus & Company
  • Michelle M. Carter, Assistant Vice President – Executive Risk, Hays Companies
  • David E. Rosedahl, General Counsel,
    Dougherty & Co.
  • Daniel J. Supalla, Briggs and Morgan, P.A. (Moderator)
4:15 – 5:00 pm  Networking Reception
The agenda has been submitted for 6 CLE credits (.75 ethics credit, 1 elimination of bias credit and 4.25 general credits).
Lunch will be provided.

Click here to register.


Posted in Cybersecurity and Data Privacy, Department of Labor (DOL), Fiduciary Duty Rule, FINRA, Insurance, Litigation, Retirement Planning, SEC, Securities Litigation, Uncategorized | Tagged , ,

Are You Ready to Comply With the DOL Fiduciary Duty Rule If It Goes Into Effect on April 10? (Part III: Your E&O Policy)

We are now two weeks from the still-current April 10 implementation date of Department of Labor’s (DOL) Fiduciary Duty Rule.

The DOL is still considering a proposed 60-day delay, but that delay might not be approved before April 10. And, while the DOL has said that, if the delay isn’t granted by April 10, it still won’t enforce the Fiduciary Duty Rule “for a reasonable time” after April 10, that won’t necessarily prevent plaintiff’s firms from suing under the Rule after April 10. (Our previous blog post discussing the DOL’s Temporary Enforcement Policy) is here.

We have previously discussed preparing your commission grids (here) and the Best Interest Contract Exemption (BICE) disclosures (here).

We now turn to your firm’s errors & omissions (E&O) policy. In the event a plaintiff’s firm decides to sue under the Fiduciary Duty Rule, you will want to have considered whether such a claim is covered.

Here are some issues to discuss with your broker, in advance of April 10:

  • Is your policy’s definition of “Professional Services” broad enough to cover claims based not only on imprudent advice, but conflict of interest and excessive fees?
  • Does your policy include a fiduciary liability exclusion? If so, you should consider if you can negotiate a carve-out of that provision – sooner rather than later.
  • Does your policy include a statutory violation exclusion and would the E&O carrier apply that exclusion to a claim brought under the DOL Fiduciary Duty Rule?
  • Does your policy include a class action exclusion, and if so, can your firm negotiate that exclusion out of the policy?
  • Finally, if your policy excludes coverage for damages based upon excessive fees, try to negotiate at least defense costs for such claims.

Remember – it is always better to ask questions about your coverage before you need it.


Susan Gelinske and Lauren Lonergan contributed to this post.


Posted in Administration, Department of Labor (DOL), E&O Coverage, Fiduciary Duty Rule, Uncategorized | Tagged , , ,

DOL’s Temporary Enforcement Policy Brings Cold Comfort

The Department of Labor’s (DOL) Temporary Enforcement Policy on the Fiduciary Duty Rule published on March 10, 2017 (Temporary Policy) has, from our point of view, little impact and serves merely to confuse.

The Temporary Policy seems to imply that the DOL will temporarily stay enforcement of the Rule. Specifically, the DOL states:

  • If the DOL issues a rule after the April 10 implementation date that delays the Fiduciary Duty Rule, then the DOL “will not initiate an enforcement action” based upon any failure to comply with the Fiduciary Duty Rule or its exemptions during the “gap period” between the April 10 implementation date and the date the delay is implemented.
  • If the DOL does not delay the April 10 implementation date, then the DOL “will not initiate an enforcement action” because a firm or advisor failed to comply with the Fiduciary Duty Rule or its exemptions, provided that the adviser or financial institution satisfies the applicable conditions of the Fiduciary Duty Rule and its exemptions, including sending out the required disclosures, within a “reasonable period” after the DOL announces that there will be no delay.

Field Assistance Bulletin No. 2017-10, copy here.

But, remember, when the Rule was published, the DOL emphasized that it would not bring enforcement actions because of limited resources. The DOL stated quite clearly that private litigation would serve as the enforcement tool.

If enforcement is left to private litigants, then the Temporary Policy has little or no impact, since the Temporary Policy does not prevent private litigants from bringing actions. Also, the reprieve for an undefined “reasonable period” does little to bring comfort or clarity.

Given the confusion created by the DOL’s Temporary Policy, it strikes us that the Rule should be vacated, and the process should begin anew. Businesses and investors need clarity, not an ever-changing field of play.

Posted in Department of Labor (DOL), Fiduciary Duty Rule, Uncategorized | Tagged , , | 1 Comment

Are You Ready to Comply With the DOL Fiduciary Duty Rule If It Goes Into Effect on April 10? (Part II: The BICE)

We are now five weeks from the still-current April 10 implementation date of United States Department of Labor’s (DOL) Fiduciary Duty Rule.

Yes, a delay still seems very likely. On March 1, the DOL issued a proposed rule that would delay the implementation date 60 days, to June 9. There is a 15-day comment period on the proposed delay. Then, the Office of Management and Budget (OMB) still has to approve the delay.

Until that happens, the April 10 implementation date controls. Will you be ready? For that matter, will you be ready if the Rule goes into effect on June 9?

Last week, we discussed preparing your commission grids, and working to make sure they comply with the Fiduciary Duty Rule. (That post is here.)

This week, we turn to the Best Interest Contract Exemption (the BICE).

While full compliance with the BICE is not required until January 1, 2018, there are some important requirements that take effect on April 10. During the “transition period” (the period between April 10, 2017 and January 1, 2018), firms are required to do the following under the BICE:

  • Comply with the “Impartial Conduct Standards.” The Impartial Conduct Standards require firms and advisers to: (i) give advice that is in the best interest of the retirement investor; (ii) charge no more than reasonable compensation; and (iii) make no misleading statements about investment transactions, compensation, and conflicts of interest.
  • Provide a written notice to retirement investors that: (i) acknowledges their fiduciary status; (ii) states that the firm and its advisers will comply with the Impartial Conduct Standards and disclose material conflicts of interests; and (iii) makes certain disclosures regarding the firm’s recommendations of proprietary products or investments that generate third party payments.
  • Designate a person or persons responsible for addressing material conflicts of interest and monitoring advisers’ adherence to the Impartial Conduct Standards.
  • Comply with the recordkeeping requirements of Section V(b) and (c) of the BICE.

As you can see from the above, any firm that believes it can wait until January 1, 2018 to worry about compliance with the BICE does so at its peril.

Posted in Administration, Department of Labor (DOL), Fiduciary Duty Rule, Uncategorized | Tagged , , , , | 1 Comment

Are You Ready to Comply With the DOL Fiduciary Duty Rule If It Goes Into Effect on April 10?

We are now six weeks from the April 10 implementation date of DOL’s Fiduciary Duty Rule. While the DOL has filed a proposal to delay the implementation date with the Office of Management and Budget (OMB), and while the industry largely expects the OMB to approve the delay (possibly even this week), as it stands right now, the April 10 implementation date controls.

This means that firms should make sure their preparations are on pace to be completed by April 10, if necessary. Although many firms having been taking a “wait and see” approach to the Fiduciary Duty Rule up to this point, time is getting short, and no one wants to be caught unprepared if the Rule does go into effect on April 10. After all, you can bet that plaintiff’s firms will be ready, even if no one else is.

One element that firms should make sure they can have ready by April 10 is their compensation grids.

The DOL has explicitly stated, in its FAQs issued on October 27, 2016 (found here), that firms may still use escalating grids in their compensation structure (i.e., paying higher commission rates to advisers based on reaching certain thresholds), without violating the Rule. However, the DOL also said that firms must “exercise care” not to incentivize advisers to make recommendations that are not in the retirement investor’s best interest.

Here are a few factors that firms should consider in reviewing and, if necessary, revising their compensation grids:

  • Categories of investments. The DOL has said that firms can pay different commission amounts for different broad categories of investments (e.g., mutual funds versus annuities), so long as the difference is based on “neutral factors,” such as the time and complexity associated with recommending investments within different product categories. “Neutral factors” are factors that are not based on the financial interests of the firm (e.g., the profitability of the investment), but rather on significant differences in the work that justify drawing distinctions between categories and compensation. However, the DOL cautions that “because compensation varies between categories under this model, the financial institution should exercise special care to monitor recommendations between categories.” (FAQs at p. 8.) In other words, firms will need to keep records of why the recommendations were made and ensure they can demonstrate that the transactions were adequately supervised.
  • Size of steps. The DOL has cautioned firms to keep to “modest or gradual increases” rather than “large” increases. Of course, what constitutes “modest” versus “large” may be in the eye of the beholder. (This is one of many areas in which the Rule seems to encourage firms to look at each other for an industry standard. We have previously discussed our antitrust concerns about this aspect of the Rule.) As guidance, the DOL has warned, “financial institutions must exercise care to avoid dramatic increases in compensation that undermine the best interest standard and create misaligned incentives for advisers to make recommendations based on their own financial interest, rather than the customer’s interest in sound advice.” (FAQs at p. 8.)
  • Retroactivity. The DOL has specifically said that increased compensation should only apply to new investments once the threshold is reached. “If the consequence of reaching a threshold is not only a higher compensation rate for new transactions, but also retroactive application of an increased rate of pay for past investments, the grid is likely to create acute conflicts of interest.” (FAQs at p. 9.) In other words, retroactivity simply creates too big an incentive for the adviser to recommend those last few transactions to reach the threshold, regardless of whether those transactions are in the retirement investor’s best interest.

If firms are nervous about an aspect of their compensation, they should remember the overarching concern of the Rule: does the compensation element incentivize the adviser to recommend a transaction that is not necessarily in the retirement investor’s best interest because it will increase the adviser’s compensation? If so, the compensation element should be carefully scrutinized, because it might very well run afoul of the Rule. And always remember that the adviser should be documenting the reasons for his or her recommendations, and the firm should have a designated person reviewing those transactions for potential conflicts of interest.

Posted in Department of Labor (DOL), Uncategorized | Tagged , , | 2 Comments

Trump Picks Acosta to Lead DOL

On February 16, 2017, President Trump nominated R. Alexander Acosta for Secretary of the Department of Labor. Acosta had been identified on the shortlist of potential replacements for the DOL after Andrew Puzder withdrew from consideration. (Our post on Puzder’s withdrawal, and identifying Acosta as a potential replacement is here.)

Acosta, currently the dean of the Florida International University School of Law, previously made it through the Senate confirmation process three times for different roles. He was a member of the National Labor Relations Board from 2002 to 2003, under President George W. Bush. President Bush later named Acosta Assistant Attorney General for the Justice Department’s Civil Rights Division. Acosta then went on to become the United States Attorney for the Southern District of Florida.

Although it is a little early to speculate on Acosta’s possible effect on the DOL Fiduciary Duty Rule, Acosta at first glance does not appear to be as hostile to federal labor regulation as Puzder did. Puzder had drawn serious opposition from labor advocacy groups and Democrats, who questioned Puzder’s track record with labor disputes within his own companies and his apparent disdain for federal minimum wage, overtime, and family medical leave laws. Acosta, on the other hand, advocated in 2010 that the National Labor Relations Board should shift from a “quasi-judicial administrative agency model” to one in which it would issue rules. “Rulemaking is a better, more democratic, more stable, more transparent, and more modern path for quasi-legislative enactments,” he wrote at the time.

We will continue to update on Acosta’s confirmation process and the anticipated effects on the DOL Fiduciary Duty Rule.

Posted in Department of Labor (DOL), Fiduciary Duty Rule, Uncategorized | Tagged , ,

DOL Nominee Puzder Withdraws

On Wednesday, February 15, Andrew Puzder, President Trump’s nominee for Secretary of the Department of Labor, withdrew his name from consideration for the post. The withdrawal came after Senate Republicans had balked at supporting Puzder, based in part on his past employment of an undocumented immigrant as his housekeeper. Puzder had acknowledged that he failed to pay taxes on the housekeeper until after Trump had nominated him, which was five years after her employment had ended.

Puzder’s withdrawal will likely delay the DOL’s response to President Trump’s Memorandum of February 3, which directed the DOL to reexamine the DOL Fiduciary Duty Rule and rescind or revise the Rule as appropriate. (Our previous post on that Memorandum is here).

The DOL already filed a Notice with the Office of Management and Budget, on February 9, to delay the April 10 implementation date of the Rule. The Notice did not specify the length of the delay sought by the DOL, but it has been widely predicted that the DOL will seek an additional 180 days.

Speculation is already underway regarding Puzder’s replacement. Names that had been on President Trump’s shortlist for the DOL post have begun recirculating, including Rep. Lou Barletta (R-Pa.) and Wisconsin Governor Scott Walker. Other potential nominees are said to include former National Labor Relations Board members Peter Kirsanow and Alexander Acosta; former South Carolina Department of Labor, Licensing and Regulation Director Catherine Templeton; and Joseph Guzman, an assistant professor of labor relations at Michigan State University.

Whoever replaces Puzder as nominee will likely harbor the same skepticism toward broad federal regulation as President Trump, and the ultimate fate of the DOL Fiduciary Duty Rule therefore remains uncertain.

Posted in Department of Labor (DOL), Fiduciary Duty Rule, Uncategorized | Tagged , , | 1 Comment