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Complying with 'the Rule'
The Department of Labor's Conflict of Interest Rule's impact on data and systems
With firms finalizing their target business models and identifying the needed capabilities for compliance, it’s becoming increasingly clear that the Department of Labor’s Conflict of Interest Rule (the Rule) will have an end-to-end impact on the data and systems that support their businesses. So how much time do you really have to design and implement technology and data management solutions that will support compliance with the Rule?
- Implementation considerations
- What a firm should consider
- What needs to be done
- Implementation timeline
- Get in touch
Implementation considerations of the impact to data and systems
The requirements of the Rule have an end-to-end impact on a firm’s technology infrastructure. Key systems that will potentially be affected include:
- Account services and CRM
- Trade order management
- Books, records, and document management
- Alerts and reporting
- Monitoring and supervision
The Rule will require firms to assess the impact on the capabilities that support their end-to-end business model, define the functional needs that need to be built or enhanced, and determine the technical considerations that will need to be built to meet the requirements.
In addition, firms will need to account for competing pre-existing strategic and business-as-usual initiatives, as well as year-end technology and business blackout periods.
What should a firm consider doing now?
Professionals responsible for data and technology should obtain key operating model decisions from firm leadership (e.g., which exemption(s) will be employed,
- What are the capabilities that need to be built or enhanced for the various business scenarios selected by firm leadership?
- What are the functional requirements that are needed for compliance with the Rule?
- Where in the technology infrastructure will the requirements be implemented?
- Who are the key vendors who need to be partnered with? What is their implementation schedule?
- What are the resource (internal and external) investments that need to be made?
- What are the competing technology initiatives and how are they prioritized? Are there any scheduling conflicts?
- What governance and supervision controls need to be built or enhanced?
- Does the current structure around escalation, prioritization of “must-have,” and funding need to be enhanced?
- What documentation is required to substantiate a defensible program? How long does it need to be retained?
- Are the current change management processes adequate to ensure cohesive interconnectivity across business, legal, compliance, and technology?
What needs to be done between now and April 2017?
Firms must have the preponderance of their compliance program in place, including supporting data and systems, by the April 10, 2017, applicability date. Some key considerations and actions include:
- Supply evidence that a firm is adhering to impartial standards
- Provide certain disclosures to the investor upon the execution of recommended transactions
- Implement controls and tools to enable person(s) responsible for addressing material conflict of interest and monitoring for adherence to the impartial conduct standards
- Maintain records that demonstrate that conditions of the exemption have been satisfied
What needs to be done by January 2018?
Firms should take steps to make sure the implementation roadmap and resourcing adequately address the following requirements (as applicable to the firm) that need to be implemented by January 1, 2018:
- BIC contract content, delivery, and acceptance
- Website disclosures that include discussion of business model, material conflicts of interest, schedule of typical account or contract fee services and charges, a model contract, certain disclosures, summary of policies and procedures, list of product manufacturers making third-party payments, and disclosure of advisor compensation and incentive arrangements
- Transaction disclosures with content that includes best interest standard of care, material conflicts of interest, clients right to receive specific disclosures upon request, and a link to the website
- Disclosures upon request of costs, fees, and other compensations
Meeting the implementation timeline
Firms are at different stages of transformation in terms of assessing and addressing impacts of the Rule to their data and systems. It’s important that firms look realistically at the implementation timeline and raise the level of awareness across their firm to ensure that funding and resourcing match the needs of the firm to become compliant with the Rule. Firms must also address the overlapping requirements and effort between the two deadlines—the partial compliance date and the full compliance date—and prioritize accordingly.
Get in touch
Susan Levey, Deloitte Risk and Financial Advisory director, Deloitte & Touche LLP
Scott Parker, principal, Deloitte Consulting LLP
Maria Gattuso, Deloitte Risk and Financial Advisory principal, Deloitte & Touche LLP
Daniel Rosshirt, principal, Deloitte Consulting LLP
Karl Ehrsam, Deloitte Risk and Financial Advisory principal, Deloitte & Touche LLP
Bruce Marcus, Delotite Risk and Financial Advisory director, Deloitte & Touche LLP
Sean Cunniff, specialist leader, Deloitte Consulting LLP
Josh Uhl, Deloitte Risk and Financial Advisory senior manager, Deloitte & Touche LLP
Craig Friedman, Deloitte Risk and Financial Advisory senior manager, Deloitte & Touche LLP
Sameer Shroff, Deloitte Risk and Financial Advisory senior manager, Deloitte & Touche LLP
Subrahmanyan Ramnath, Deloitte Risk and Financial Advisory managing director, Deloitte & Touche LLP