Rollovers are one of the key areas of focus for advisors within the new SEC Best Interest rule (“Reg BI”). This is not just because of their importance for advisors generally, but because there was still a good degree of uncertainty over how the new rule would be applied to the area. Recent edits to the rule clarify its application, and the results are likely to seem a little unfavorable, as they are more strict than previously. In the past, rollovers were only subject to Rule 2111 if securities were to be bought or sold in the plan. This left a bit of wiggle room. However, the new Reg BI has been modified and Rule 2111 now applies to any situation, regardless of whether securities are involved. Thus, rollover recommendations by broker-dealers are now completely governed by the best interest standard in all scenarios.
FINSUM: Not unexpected, but many were hoping for more flexibility. At least there is now confirmation.