Meyer Wilson

Recovering Losses Caused By Investment Misconduct

New Fiduciary Rule Protection

The new federal fiduciary rule requires financial advisors to act in the best interest of their clients when handling retirement assets. The rule applies to all financial advisors and registered brokers who charge fees and commissions for services.

The New Fiduciary Rule Provides Protection

On June 9, 2017, the Department of Labor rolled out the first phase of a new federal fiduciary rule that requires financial advisors to act in the best interest of their clients. The new rule considers financial advisors who handle retirement investment accounts to be fiduciaries and requires them to comply with conduct standards that protect the client. That means they must give advice that’s in the best interest of their investors, avoid making misleading statements, and charge reasonable fees and commissions for their services. In the past, financial advisors were governed by less stringent standards that allowed them to charge higher fees and recommend more costly investment options, even if there were cheaper or better options available.

While the new rules primarily impact financial advisors and brokers who handle retirement plans like 401(k) accounts, Roth accounts, and traditional IRAs, all financial institutions who provide investment services to retirement plans must understand how the new fiduciary rule impacts their duties. Failure to comply will constitute a breach of fiduciary duty, which will subject an advisor or broker to personal liability for damages.

Clients who suffer damages can file a claim or lawsuit through a Finra arbitration attorney to recover losses caused by investment misconduct. If the Department of Labor becomes involved, a penalty equal to 20 percent of the loss may be imposed for breach of fiduciary duty. The advisor will also be subject to annual prohibited transaction excise taxes until the prohibited transaction is corrected. Plan sponsors, plan administrators, and plan committee members may also be held liable for damages if their acts or omissions allow the advisor to breach his/her fiduciary duties.

Implementation in Phases

The new fiduciary rule is set up as a phased plan. The full implementation will not take effect until January 1, 2018. While the first phase obligates advisors and brokers to honor conduct rules, the Labor Department will not enforce penalties until the plan goes into full implementation. Investors who are harmed by advisor or broker misconduct will not be able to bring class action lawsuits until after January 1, 2018, however they may file claims for damages through a FINRA arbitration attorney during the transition process.

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