Small RIAs Likely Violating New DOL Rollover Rule Without Knowing It: ERISA Lawyer

In a more recent interview, Reish told ThinkAdvisor that “many small RIA firms (eg., 5 advisors or less … and perhaps a few more than that) are not aware of PTE 2020-02 or its requirements. That is partially the case because those firms don’t regularly do retirement plan work and are unaware that the DOL regulates them.”

For instance, unlike most broker-dealers and large investment advisory firms, these small firms “do not receive information about DOL guidance and do not attend conferences with DOL programs. In addition, they usually do not have an in-house attorney or a dedicated compliance officer.”

Advisors at these small firms “do recommend plan-to-IRA rollovers and IRA-to-IRA transfers,” Reish continued. “I am concerned that there may be a large number of noncompliant recommendations to rollover or to transfer IRAs. This is not because of an intention to defy or violate the rules, but instead is due to a lack of awareness of DOL-issued rules.”

Noncompliant recommendations, Reish said, “result in prohibited transactions, which can result in loss of compensation, interest and penalties.”

The Labor Department and the investment advisory industry “need to consider how to better educate small investment advisory firms, and need to have a way to bring those firms into compliance without penalties,” Reish said.