June 8, 2016
Pershing LLC, a BNY Mellon company, today announced its solutions and resources to help financial services firms comply with the Department of Labor’s (DOL) Conflict of Interest rule. Over the past 18 months, Pershing has been working to help firms understand the rule and developing solutions, which it will soon start to roll out.
“While some aspects of the final version of the DOL’s Conflict of Interest Rule will be easier to implement than the initial proposal, the essence of the rule is the same and it could profoundly change financial services firms’ operating models, compensation arrangements and supervisory structures,” said Rob Cirrotti, managing director and head of retirement and investment solutions at Pershing. “We’ve identified various needs that have emerged as a result of the new rule and have been working to develop solutions to help our clients achieve success in this regulatory environment. The combination of our new and existing tools helps our clients operate as fiduciaries.”
Each of the solutions and resources are designed to help financial services firms address changes in the following key areas: transitioning to an advisory model, exemption compliance, supervision and surveillance.
The DOL rule is likely to impact the shift toward the advisory model— as registered reps consider the switch from a commission-based brokerage model where products are sold to investors, to fee-based advisory relationships where products are bought for investors. Pershing will launch the following new advisory capabilities to assist with this transition:
Prohibited Transaction Exemption Compliance
The industry will have to adapt to new compliance realities and the nuances of prohibited transaction exemptions, which allow firms and advisors to be compensated if certain conditions are met. In response, Pershing is developing solutions to help firms and registered reps who determine that compliance with the new Best Interest Contract Exemption (BIC) is warranted. The solutions will be designed to facilitate end-to-end compliance— from creating contracts and disclosures to record-keeping. Pershing is also developing programs for broker-dealers to manage contracts, disclosure and controls to support their compliance needs.
Supervision and Surveillance
As a condition of the BIC exemption, firms and registered reps will need to adhere to the Impartial Conduct Standards, which includes using prudence when delivering investment advice. In light of the prudence standard, Pershing expects that there will be a greater need for surveillance and supervision to achieve compliance and document evidence of it. Pershing is in the process of determining which reporting packages and workflows need to be created for firms to ensure their advisors are compliant. Pershing is also examining enhancements to allow firms to supervise and surveil assets on their platform.
For more resources from Pershing on the DOL’s fiduciary regulation, visit https://www.pershing.com/dol.
About BNY Mellon's Pershing
BNY Mellon’s Pershing and its affiliates provide advisors, broker-dealers, family offices, hedge fund and ’40 Act fund managers, registered investment advisor firms and wealth managers with a broad suite of global financial business solutions. Many of the world’s most sophisticated and successful financial services firms rely on Pershing for clearing and custody, investment and retirement solutions, technology, enterprise data management, trading services, prime brokerage, managed account technology and operations and business consulting. Pershing helps clients improve profitability and drive growth, create capacity and efficiency, attract and retain talent, and manage risk and regulation. With a network of offices worldwide, Pershing provides business-to-business solutions to clients representing more than seven million investor accounts globally. Pershing LLC (member FINRA, NYSE, SIPC) is a BNY Mellon company. Professionally advised managed accounts are offered through its affiliate, Lockwood Advisors, Inc., which is an investment adviser registered in the United States under the Investment Advisers Act of 1940. Additional information is available on pershing.com, or follow us on Twitter @Pershing.
About BNY Mellon
BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle. Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment and wealth management and investment services in 35 countries. As of March 31, 2021, BNY Mellon had $41.7 trillion in assets under custody and/or administration, and $2.2 trillion in assets under management. BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available on www.bnymellon.com. Follow us on Twitter @BNYMellon or visit our newsroom at www.bnymellon.com/newsroom for the latest company news.