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I am a Retired Financial Planner who doesn't take new

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I am a Retired...

I am a Retired Financial Planner who doesn't take new clients. I have 6 existing clients I advise them on their 401K assets. I advise Asset Allocation (within and outside their 401k plan so as to get there entire look of assets) and set up the transfer of monies within mutual funds available to them in the plan. After doing this for 25 yrs I have suddenly and for the first time been told I am in custody of their 401K funds. Using this definition I am now not in compliance with State requirements. I have a contract with each client specifically stating I do not have custody of the account and custody remains with the company hired by the 401k administrator. Long story short I now am going to be required to meet more regulator laws which are administrated by the SEC (such as setting up an accounting section, on demand audits and others which are done by broker/dealers such as Schwab-Fidelity Bank-Mellon Bank - Etrade- Ameritrade and others). The Dominion Energy (who I worked for and took an early package out) does not have the capability or procedure to even set up something like this. My question is do I have anything to stand on to put up a fight against my newly found custody of my 6 clients still in the 401k plan? I am going to go thur with fighting them all the way to the 3 commissioners. I am now at the Director level and will go before him soon. Advise please.

Lawyer's Assistant: Because employment law varies from place to place, can you tell me what state this is in?

I have learned a lot but feel very much out of my element and need some advise from someone like you guys. gw

Lawyer's Assistant: Is the employment agreement "at will," union, full time or part time?

I am not employed with them but the 6 clients are a mixture of union and salary-both have different SPD which both allow me to give advise.

Lawyer's Assistant: Anything else you want the lawyer to know before I connect you?

Yes, but it would take hours.

Submitted: 8 months ago.Category: Employment Law
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11/16/2017
Employment Lawyer: Law Educator, Esq., Attorney replied 8 months ago
Law Educator, Esq.
Category: Employment Law
Satisfied Customers: 125,884
Experience: 20+ Years of Employment Law Experience
Verified

Thank you for your question. I look forward to working with you to provide you the information you are seeking for educational purposes only.

Under 17 CFR 275.206(4)-2:

(2)Custody means holding, directly or indirectly, client funds or securities, or having any authority to obtain possession of them. You have custody if a related person holds, directly or indirectly, client funds or securities, or has any authority to obtain possession of them, in connection with advisory services you provide to clients. Custody includes:

(i) Possession of client funds or securities (but not of checks drawn by clients and made payable to third parties) unless you receive them inadvertently and you return them to the sender promptly but in any case within three business days of receiving them;

(ii) Any arrangement (including a general power of attorney) under which you are authorized or permitted to withdraw client funds or securities maintained with a custodian upon your instruction to the custodian; and

(iii) Any capacity (such as general partner of a limited partnership, managing member of a limited liability company or a comparable position for another type of pooled investment vehicle, or trustee of a trust) that gives you or your supervised person legal ownership of or access to client funds or securities.

So, in order to successfully argue against the rule application to your situation, you need to put your evidence together that you do not meet that criteria above regarding your advice provided to those clients. I would not recommend going without a local finance/investment law attorney beyond the director level with this appeal. If you cannot convince the Director you do not fit the definition of custody based on how you deal with these clients, getting an attorney to seek to pursue the matter further is your best option as they can examine your whole arrangement and determine if there is another angle to pursue or could potentially change your agreement with the clients just enough to avoid you coming under the rule change.

Please do not forget to leave positive feedback by clicking on the 5 stars at the top of your page, as the experts are not employees of the site and get no credit for spending time with customers unless they leave positive feedback. Thank you.

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Customer reply replied 8 months ago
of course you are correct in advising me of the requirements. I had been advised by the SCC to look at 21VAC5-80-146 for a more descriptive analysis of what is in play when determining custody or not. I have been providing this service to my clients for 25 years only to be told is has just become an issue!!! Upon more research I found that EIRISA is the governing body but other State Departments do have certain access to compliance issues. While I do not know what has changed in the last year which would disqualify me as a financial representative allowed to research, advise and place transfers of clients assets insuring the best possible outcome based upon objective results from their survey. I also need access to their 401k assets to make sure I am giving my clients a preferred Asset Allocation model based upon all know assets held by the client, including the 401K at work. I might add I worked for the company for 20 yrs before my retirement and know much about the system. I have a contract with each individual basically stating our goals and indicating that I do not and will not have custody of their assets at any time. I am there to devise a plan and to enact that plan. I do not know of why they are so adamant about getting me out of the way. One other comment I would add is Dominion uses Financial Engines to provide employees with an alternative to setting up their own model. Mr. Sharp devised it and it seems to be a very good program. I love his Sharp ratio and use it in my analysis while devising an asset allocation for my clients. The last thing I would like to mention is that I only have 18 clients of which 8 have 401ks thru Dominion Energy. By the end of the year I will only have 6 because two are retiring and will transfer all assets from the program at work. The six will still be with me until they all retire and transfer assets out to another brokerage firm. With so little employees and the handling of a very small amount of clients I can't figure out why they are going after me after all these years. I have just notified the Manager I plan to sue the SCC for Age Discrimination based on the many, many obstacles they have inadvertently placed in my way so as to cause me time, money and many hours of research to become somewhat capability of bringing an action against them. So we are up against some very good people to say the least. Hope you can help.
Employment Lawyer: Law Educator, Esq., Attorney replied 8 months ago

Thank you for your question. I look forward to working with you to provide you the information you are seeking for educational purposes only.

ERISA is not a governing body, it is the Employee Retirement Income Security Act, it is a law regarding retirement and employee benefit plans.

The issue is the control over the accounts, which places you in custody. So if you do not have access to withdraw, deposit or move around funds in the account you do not have custody of the accounts and the owner of the account retains custody and you would need to simply advise them on how and where to move their money and you can assist them on doing so.

Please do not forget to leave positive feedback by clicking on the 5 stars at the top of your page, as the experts are not employees of the site and get no credit for spending time with customers unless they leave positive feedback. Thank you.

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