White Paper: Operational Process Flows and Considerations Related to Dealer/Custodian Resignations in Response to the Fiduciary Rule
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October 26, 2016
TO: BANK, TRUST AND RETIREMENT ADVISORY COMMITTEE No. 43-16BROKER/DEALER ADVISORY COMMITTEE No. 40-16
COMPLIANCE MEMBERS No. 37-16
OPERATIONS COMMITTEE No. 26-16
PENSION OPERATIONS ADVISORY COMMITTEE No. 7-16
PRINCIPAL UNDERWRITERS WORKING GROUP
SMALL FUNDS COMMITTEE No. 29-16
TRANSFER AGENT ADVISORY COMMITTEE No. 55-16 RE: WHITE PAPER: OPERATIONAL PROCESS FLOWS AND CONSIDERATIONS RELATED TO DEALER/CUSTODIAN RESIGNATIONS IN RESPONSE TO THE FIDUCIARY RULE
We are pleased to announce the publication of a new white paper, Operational Process Flows and Considerations Related to Dealer/Custodian Resignations in Response to the Fiduciary Rule.
As you are aware, on April 6, 2016, the Department of Labor (DOL) issued a final regulation (final rule) defining who is a “fiduciary” under Section 3(21) of the Employee Retirement Income Security Act of 1974 and Section 4975(e)(3) of the Internal Revenue Code as a result of giving investment advice to an employee benefit plan, plan fiduciary, plan participant or beneficiary, individual retirement account (IRA), or IRA owner.
As the applicability date[1] of the final rule approaches, it is anticipated that certain financial intermediaries, and mutual funds in limited circumstances, may choose to resign as broker-dealer of record or as both broker-dealer of record and custodian on certain tax-deferred accounts. An ICI industry working group developed the white paper to outline the high-level operational process flow and common protocols related to the dealer and custodian resignation process under the final rule.
The white paper, published on ICI’s website, is available here.
This white paper is meant to serve as a guide for funds and intermediaries as they prepare for and undertake dealer and custodian resignations as a result of the final rule. The paper covers the following topics:
- Resignations as Broker-Dealer of Record Only. Discusses industry recommended practices related to the process of resigning as broker-dealer of record, including critical communication topics, necessary data points, and the method for completing the resignation.
- Resignations as Broker-Dealer of Record and as Custodian. Discusses industry recommended practices related to the process of resigning as broker-dealer of record and custodian, including critical communication topics, considerations related to the resignation as custodian or serving as a successor custodian, necessary data points, and the method for completing the resignation and transferring accounts.
- Process Flows for Broker-Dealer of Record Only Resignations. Outlines the high-level process flow and critical steps required for a party to resign as broker-dealer of record only.
- Process Flows for Broker-Dealer of Record and Custodian Resignations. Outlines the high-level process flow and critical steps required for a party to resign as broker-dealer of record and custodian.
- Minimum Required Data Points and File Layouts. Outlines the minimum required data points necessary for the resigning party to provide upon resignation as dealer or as dealer and custodian. Also provides an industry standard file layout to facilitate transfers of accounts outside of the NSCC or the delivery of preliminary files in advance of the agreement to resign.
Webinar
ICI will be hosting a webinar on November 9, 2016, from 2:00 – 3:00 p.m. ET to discuss the guidance provided within the paper. More information about the webinar, including speakers and a link to register, is available.
We hope you find this paper beneficial as you discuss and implement processes and procedures related to dealer and custodial resignations. Questions or comments on the white paper may be directed to Joanne Kane at the ICI (joanne.kane@ici.org, 202-326-5850).
Joanne Kane
Director - Operations & Transfer Agency
endnotes
[1] The final rule was effective on June 7, 2016, but the general applicability date is April 10, 2017.