- RIAs and Customer Identification Just as RIAs owe a duty to diligently protect their clients’ privacy and guard against theft, firms also play a vital role in customer identification. Although RIAs are not subject to an anti-money laundering rule, securities regulators expect advisors to address these issues in their policies and procedures.
- Disaster Recovery Plans and Succession Planning RIAs owe a fiduciary duty to clients to prepare for disasters and other contingencies. If an RIA does not have a disaster recovery plan, clients’ financial well-being may be jeopardized. RIAs should also engage in succession planning, ensuring a smooth transaction if an owner or principal leaves.
The Department of Labor announced Monday that it had reached a settlement agreement with ING Life Insurance and Annuity Co. (ILIAC) that provides for a $5.2 million payment to certain retirement plan clients adversely affected by ILIAC’s failure to disclose investment gains achieved when the company failed to process requested transactions in a timely manner.
The department alleged that ILIAC’s failure to disclose its policy on reconciling transaction processing errors to retirement plan clients was a violation of the Employee Retirement Income Security Act.
Acting Labor Secretary Seth Harris said in a statement that this “settlement will restore funds to about 1,400 retirement plans and ultimately benefit hardworking Americans who are making sacrifices now in order to save for their retirement years.”
Harris continued: “All of us who are planning for retirement deserve to know how our savings and investments are being handled, how much is being charged in fees and how much these transactions impact final account balances.”
Phyllis Borzi, assistant secretary of labor for EBSA, said in the same statement that the settlement “is reflective of my agency’s commitment to enforcing requirements for transparency in the retirement savings marketplace. Failure of a plan fiduciary to disclose the revenue it received from managing retirement plans is a disservice to employers who are providing this benefit to their workers.”
The agreement announced Monday also requires ILIAC to disclose its policy on how it corrects transaction processing errors to plan clients covered by ERISA and to adopt procedures for terminating abandoned plans through the EBSA’s Abandoned Plan Program. In addition, ILIAC has agreed to pay a $524,508.73 civil penalty.
ILIAC is an insurance company with approximately 35,000 ERISA-covered plan clients. It has offices in Connecticut and provides, among other things, custodial and third-party administration services to defined contribution plans that are sponsored by businesses.
“The $5.2 million that ILIAC has agreed to pay represents net gains kept by the company that resulted from the manner in which certain transaction processing errors were handled during the 2008-2011 period,” DOL said. The department alleged that this service provider’s failure to disclose its transaction error correction policy to its ERISA plan clients resulted in it receiving compensation in violation of the act.
“It has been ILIAC’s practice to keep gains derived from processing transactions that it failed to timely process as of the contract date as well as from re-processing erroneous transactions,” DOL said. “In both instances, ILIAC makes corrections using the date required by its contract. Gains and losses result when the share or unit value differs between the contract date and the actual trade date. Any gains in share or unit value between the contract date and trade date are kept by ILIAC, whereas ILIAC is obligated, by contract, to make plans whole for any losses.” /* .premium-promo { border: 1px solid #ddd; padding: 10px; margin: 0 10px 10px 0; width: 200px; float: left; } .premium-promo li, .premium-promo ul { list-style-type: none; margin: 0; padding: 0; } .premium-promo li { margin: 0 0 10px; padding: 0 0 10px; border-bottom: 1px dotted #ddd; } .premium-promo h3 { text-transform: uppercase; font-size: 11px; } .premium-promo h4 { font-size: 16px; } .premium-promo a { text-decoration: none !important; } .premium-promo .btn { background: #0069a1; border-radius: 4px; display: inline-block; padding: 5px 10px; clear: both; color: #fff; font-weight: bold; } .premium-promo .btn:hover { background: #034c92; } */ $(function() { $('div.current p').eq(1).attr('class','marked'); // $('H').insertAfter('.marked'); $('div.premium-promo').insertAfter('.marked'); $('.article-content ul').each(function() { $(this).prev('p').attr('style','clear:both'); }); }); According to DOL, the settlement agreement requires that ILIAC make full disclosure of its transactions policy to its current and prospective ERISA plan clients in writing. Current plan clients will be given the opportunity to object to the policy within 30 days of receipt of notice. Prospective plan clients will be informed of the policy by way of its incorporation in ILIAC’s contracts and service agreements.
The disclosure, DOL said, also will state that ILIAC will track the effect of the corrections for each affected plan on an annual basis and will make that information available to its ERISA plan clients. "ILIAC will acknowledge in the disclosure that any gains it keeps as a result of the policy constitute additional compensation for the services the company provides and it will report such compensation in accordance with ERISA Section 408(b)(2)," DOL said.
According to the settlement, ILIAC also will ensure that any plans deemed to have been abandoned will be properly terminated. It will attempt to contact the sponsor of each such plan, and if its efforts are unsuccessful, ILIAC agrees to become that plan’s qualified termination administrator.
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