Pershing LLC, a BNY Mellon company, today announced the release of a two-part series on fiduciary and compensation compliance challenges. Pershing's new series, Conflicts in a Rapidly Changing Fiduciary Landscape, developed in collaboration with Groom Law Group, is intended to help broker-dealers and hybrid firms identify and address potential conflicts of interest in their business models.
"Rules governing acceptable compensation practices are fast-evolving," said Rob Cirrotti, managing director and head of investment and retirement solutions at Pershing. "In this environment, firms that aren't prepared to address these dramatic changes will be at a disadvantage. The reality is that new regulation, such as the Department of Labor's proposed Conflict of Interest rule, has implications for all business models—and everyone needs to begin proper planning and compliance oversight."
The two-part series addresses the unique challenges for broker-dealers and hybrid firms and reviews the current compensation practices that may create conflicts of interest for each business model respectively. The series also discusses potential compliance practices each type of firm can put in place to identify and address potential conflicts between the standards of care and the manner in which the firm or its representatives are compensated.
The series will be rolled-out as follows:
- Part One – A Focus on Broker-Dealer Challenges discusses broker-dealer practices that may create potential conflicts including 12b-1 fees received as compensation for sales resulting from recommendations of mutual funds to clients, revenue sharing payments, transaction fee and no-transaction-fee (NTF) funds, and recommendations on IRAs as well as ERISA plans.
- Part Two – A Focus on Dually Registered or "Hybrid" Challenges looks at the unique compensation-related conflicts that hybrid firms face. Hybrid firms will need to carefully evaluate revenue streams that might be available as a broker-dealer, such as 12b-1 fees based on the investment advice they provide as an RIA. The whitepaper points out the ways dually registered financial professionals will face increased scrutiny with their investment recommendations.