Defined contribution plan

Industry & Regulatory News

SEC Final Rule on Broker-Dealer Electronic Recordkeeping Requirements Set for Publication in Federal Register

The Securities and Exchange Commission (SEC) is adopting amendments to the recordkeeping rules applicable to broker-dealers, security-based swap dealers (SBSDs), and major security-based swap participants (MSBSPs). The amendments modify requirements regarding the maintenance and preservation of electronic records, the use of third-party recordkeeping services to hold records, and the prompt production of records. The SEC is also designating broker-dealer examining authorities as SEC designees for purposes of certain provisions of the broker-dealer record maintenance and preservation rule.

The SEC’s broker-dealer electronic recordkeeping rule currently requires firms to preserve electronic records exclusively in a nonrewriteable, nonerasable format, known as the write once, read many format. The amendments add an audit-trail alternative under which electronic records can be preserved in a manner that permits the recreation of an original record if it is altered, over-written, or erased. According to the SEC, the audit-trail alternative is designed to provide broker-dealers with greater flexibility in configuring their electronic recordkeeping systems so they more closely align with current electronic recordkeeping practices while also protecting the authenticity and reliability of original records. The amendments apply the same requirements to nonbank SBSDs and MSBSPs.

The amendments also require broker-dealers and all types of SBSDs and MSBSPs to produce electronic records to securities regulators in a reasonably usable electronic format.

With publication in the federal register set for tomorrow, the final rule is effective January 3, 2023, and compliance dates for the new requirements will be May 3, 2023, for broker-dealers and November 3, 2023, for SBSDs or MSBSPs.

November 03 2022

Industry & Regulatory News

Federal Prime Interest Rate Increased to 7 Percent

Effective November 2, 2022, the federal prime interest rate increased from 6.25 percent to 7 percent. The prime interest rate is largely determined by the federal funds rate, as set by the Federal Reserve’s Federal Open Market Committee (FOMC). As Department of Labor regulations require a retirement plan loan interest rate to be comparable to interest rates charged by entities that are in the business of lending money in similar circumstances, plan sponsors typically use a benchmark such as the prime rate to set the interest rate on plan loans.

The next FOMC meeting is scheduled for December 14, 2022.

November 03 2022

Industry & Regulatory News

SEC Adopts Rules to Enhance Proxy Voting Disclosures

The Securities and Exchange Commission (SEC) has finalized rules to amend Form N-PX, Annual Report Of Proxy Voting Record of Registered Management Investment Company, to enhance the information mutual funds, exchange-traded funds (ETFs), and certain other funds currently report annually about their proxy votes and to make that information easier to analyze. The rule and form amendments will also require institutional investment managers subject to the Securities Exchange Act of 1934 to report annually on Form N-PX how it voted proxies relating to executive compensation matters.

The rule is effective July 1, 2024.

November 03 2022

Industry & Regulatory News

SEC Re-Proposes Mutual Fund “Hard Close”

The Securities and Exchange Commission (SEC) has released a proposed rule titled “Open-End Fund Liquidity Risk Management Programs and Swing Pricing; Form N-PORT Reporting.”

November 03 2022

Industry & Regulatory News

PBGC Proposes Modifications to Form 5500 Schedule R and SB Reporting

The Pension Benefit Guarantee Corporation (PBGC) has submitted to the Office of Management and Budget an information collection request and extension related to Form 5500 series annual reporting requirements. Specifically, the request proposes modifications to Schedule R, Retirement Plan Information, and Schedule SB, Single-Employer Defined Benefit Plan Actuarial Information.

November 03 2022

Industry & Regulatory News

DOL’s Proposed Restated Voluntary Fiduciary Correction Program has left OMB

A Department of Labor proposed rule restating the Voluntary Fiduciary Correction Program (VFCP) has left the Federal Office of Management and Budget—suggesting that official release may come soon.

The VFCP is a voluntary enforcement program that allows plan officials to identify and correct certain transactions, such as delinquent participant contributions, sales and exchanges, improper loans, and improper plan expenses. The VFCP was last updated in 2006.

November 01 2022

Industry & Regulatory News

SEC Finalizes Rule to Modernize Shareholder Reports and Disclosures

The Securities and Exchange Commission (SEC) has released a final rule to amend requirements for shareholder reports for mutual funds and exchange-traded funds (ETFs) and rules for investment company advertisements. The SEC has identified in its press release several highlights of the final rule.

Shareholder Reports Tailored to the Needs of Retail Shareholders

The Commission’s final rule amendments will require mutual funds and ETFs that are registered on Form N-1A (“open-end funds” or “funds”) to transmit to shareholders concise and visually engaging annual and semi-annual reports that highlight information that is particularly important for retail shareholders. The final rule amendments also facilitate funds’ ability to make electronic versions of their shareholder reports more user-friendly and interactive.

Availability of Additional Information on Form N-CSR and Online

The new rules will require that funds make available online certain information that may be more relevant to investors and financial professionals who desire more in-depth information. This information also must be delivered free of charge upon request and filed on a semiannual basis on Form N-CSR. This information includes, for example, a fund’s schedule of investments and other financial statement elements.

Amendments to the Scope of Rule 30e-3 to Exclude Open-End Funds

The SEC adopted amendments to exclude open-end funds from the scope of rule 30e-3, which generally permits certain registered investment companies to satisfy shareholder report transmission requirements by making these reports and other materials available online and providing a notice of the reports’ online availability, instead of directly providing the reports to shareholders.

Fee and Expense Information in Investment Company Advertisements

The final rule amendments require that presentations of investment company fees and expenses in advertisements and sales literature by registered investment companies and business development companies be consistent with relevant prospectus fee table presentations and be reasonably current. The rule amendments also address representations of fees and expenses that could be materially misleading.

The final rule amendments will become effective 60 days after publication in the Federal Register. The SEC is providing an 18-month transition period after the effective date of the final rule amendments to allow open-end funds adequate time to adjust their shareholder reports and comply with the rule 30e-3 changes. The SEC is also providing an 18-month transition period after the effective date to comply with the final rule amendments to the advertising rules. The final rule amendments that address representations of fees and expenses that could be materially misleading apply on the effective date.

October 27 2022

Industry & Regulatory News

SEC Proposes Requirements for Investment Advisor Outsourcing

The Securities and Exchange Commission (SEC) has released a proposed rule to prohibit investment advisers from outsourcing certain services or functions without first meeting due diligence and ongoing monitoring requirements related to the “covered function”. A covered function is a function or service that is

  • necessary to provide advisory services in compliance with federal securities laws, and
  • if not performed or performed negligently, would be reasonably likely to cause a material negative impact on the adviser’s clients or on the adviser’s ability to provide investment advisory services.

The SEC is providing examples of potential covered function categories an adviser may wish to consider in the amendments they are proposing to Form ADV, Section 7.C of Schedule D. Covered functions listed would include: Adviser/Subadviser; Client Services; Cybersecurity; Investment Guideline/Restriction Compliance; Investment Risk; Portfolio Management; Portfolio Accounting; Pricing; Reconciliation; Regulatory Compliance; Trading Desk; Trade Communication and Allocation; and Valuation.

The proposal would also require advisers to obtain reasonable assurances that a third party recordkeeper will meet four standards which address the third party’s ability to

  • adopt and implement internal processes for making and/or keeping records that meet recordkeeping rule requirements applicable to the books and records being maintained on behalf of the adviser;
  • make and/or keep records that meet all of the requirements of the recordkeeping rule applicable to the adviser;
  • provide access to electronic records; and
  • ensure the continued availability of records if the third party’s relationship with the adviser or its operations cease.

Comments should be received on or before 30 days after publication in the Federal Register or December 27, 2022, whichever is later.  

October 27 2022

Industry & Regulatory News

IRS Announces Applicable Federal Rates for November 2022

The IRS has issued Revenue Ruling 2022-20, which contains the applicable federal rates (AFR) for November 2022. These rates are used for such purposes as calculating distributions from retirement savings arrangements that meet the requirements for substantially equal periodic payments (a 10 percent early distribution penalty tax exception), also referred to as “72(t) payments.”

October 18 2022

Industry & Regulatory News

Hardship Distributions May Be Permitted for Illinois Severe Storms and Flooding

The Federal Emergency Management Agency (FEMA) has issued a disaster declaration for severe storm and flooding in Illinois, beginning October 14, 2022.

Employers with qualified retirement plans may allow participants to take hardship distributions if

  • they have incurred expenses and losses because of a FEMA-declared disaster, and
  • their principal residence or place of employment at the time of the disaster is located in an area designated by FEMA as eligible for individual disaster assistance.

 

If the employer permits hardship distributions for expenses and losses related to a federally declared disaster, participants can check fema.gov/locations to determine if they are located in a disaster area designated for individual assistance.

The IRS may also issue relief related to this disaster for certain tax-related deadlines. Additional information can be found at irs.gov/newsroom/tax-relief-in-disaster-situations and will be announced here if such relief is granted.

October 18 2022