FAN has incorporated the definition of Fiduciary Advisers under the Pension Protection Act of 2006 (PPA) and the requirement for compliance with existing laws and regulations into the requirements for certifying advisers.
There are two categories of requirements. One based on the PPA and the other based in the Investment Advisers Act of 1940 (40 Act).
Fiduciary Adviser Application:
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PPA Requirements
Fiduciary Advisers must be, or be affiliated with either an RIA, Bank, Insurance Company or Broker/Dealer.
The advice given by a Fiduciary Adviser cannot affect the adviser's own compensation or that of any affiliated organization.
In addition to requirements of all other securities laws, the Fiduciary Adviser must:
- Have an eligible investment advice arrangement that is expressly authorized by the plan fiduciary.
- Submit to an annual audit.
- Provide written disclosures concerning all affiliations, compensation, services available among others.
- Structure compensation to be fair, reasonable and favorable to the plan.
- Acknowledge that he/she is acting as a fiduciary.
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40 Act Requirements
40 Act prohibits disclosure of client experiences that are required to comply with PPA.
Dalbar requirements are:
- Adviser must have a minimum of 5 years experience (Not required for Fiduciary Adviser Assistants.)
- Adviser must be actively engaged in serving clients.
- Adviser must have no serious regulatory infractions.
- A representative group of clients must recognize the quality of advice, trust, financial results, and service to be above average.
- Adviser must be knowledgeable about ERISA and PPA as demonstrated in a test.
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