Memo from Compliance No

Transcription

1 Memo from Compliance No To: All CFSC Registered Persons From: Chester Hebert, CEO and President Date: November 17, 2014 Re: Retirement Plan Rollover and Updated Universal Switch Letter (D041) As you already know, beginning of January 1, 2015, customers can make only one rollover in any 12- month period. To help both our Representatives and customers comply with the new rule, the firm updated its policies and procedures surrounding Retirement Plan Rollover and made some changes to its Universal Switch Letter (D041). We are asking our Representatives to read and be familiar with the policies and procedures. The updated form D041 must be completed and submitted to the Supervisor: For exchanges, transfers, rollovers or replacements across product types; and/or When recommending a customer to rollover, move or transfer an employer sponsored retirement plan account or plan assets to an individual retirement account ( IRA ). If you have any questions, please feel free to contact our compliance team. Please note that a fillable Universal Switch Letter (D041) is also posted on the firm s internal website. RETIREMENT PLAN ROLLOVER / Page 1 of 3

2 1. RETIREMENT PLAN ROLLOVER ACCOUNTS 1.1 Recommending a Rollover or Transfer of Assets in an Employer-Sponsored Retirement Plan ( the plan ) to an IRA A plan participant leaving an employer typically has four options (and may engage in a combination of these options): Leave the money in his or her former employer s plan, if permitted Rollover the assets to his or her new employer s plan, if one is available and rollovers are permitted Rollover to an IRA Cash out the account value and pay taxes and penalties, if applicable In addition, certain employer sponsored retirement plans allow its participants (currently employed with the employer) to withdraw or transfer full or part of the assets held within the employer sponsored retirement plan. Prior to recommending a customer to rollover the plan or plan assets, either full or partial, to an IRA, registered representatives should evaluate and compare advantages and disadvantages of the options 1 available for the customer based on, but not limited to: Available Investment options Available services Fees and expenses Withdrawal options Furthermore, registered representatives must have a reasonable basis to believe that such recommendation is suitable for the customer taking into account factors such as: Tax treatment and implications Legal ramifications (i.e., protection from creditors and legal judgments) Customer s unique financial needs and retirement plans 1.2 Securities Recommendations When recommending a customer to withdraw or transfer either full or part of the plan assets currently held in the customer s employer (current or former employer) sponsored retirement plan for the purpose of: (i) rolling over the assets to an account(s) held with Colorado Financial Service Corporation; and/or (ii) participating in investment(s) or transaction(s) offered or through Colorado Financial Service Corporation, the registered representative(s) must also have a reasonable basis to believe that such recommendation is suitable for the customer. Accordingly, registered representatives, in making a securities recommendation, must consider: The customer s investment profile The customer s age Other investments Financial situation and needs 1 Keeping assets in a previous employer s plan, rolling over to a new employer s plan, and rolling over to an IRA. RETIREMENT PLAN ROLLOVER / Page 2 of 3

3 Tax status Investment objectives Investment experience Investment time horizon (i.e., expected retirement date) Liquidity needs Risk tolerance Other information the customer may disclose Also refer to Suitability section of the firm s Written Supervisory Procedures manual. 1.3 Prohibited Sales Practice As the firm s policy, registered representatives are strictly prohibited from recommending customers to rollover their retirement plan account(s) or assets, either full or partial, to an IRA only for the purpose of gaining the registered representative s economic benefit(s), such as commissions and fees, as such result. 1.4 Documentation Requirements When opening a new account for or with the assets transferred or withdrawn from an employer sponsored retirement plan (either former or current), registered representatives must present their reasonable diligence on obtaining and evaluating the customer s suitability of the recommendation(s) by completing a Retirement Plan Evaluation Worksheet section of the firm s Universal Switch Letter (D041). The form must be also signed by the customer. Additional transfer or deposit(s) of an employer sponsored retirement plan asset(s) (either former or current) in an existing account with Colorado Financial Service Corporation also requires the customer signed a Retirement Plan Evaluation Worksheet section of the firm s Universal Switch Letter (D041). 1.5 Supervisory Responsibilities OSJ Supervisors are responsible for collecting and reviewing a Retirement Plan Evaluation worksheet to make certain that their registered representative(s) recommendation(s) to rollover an employer sponsored retirement plan and/or plan assets (either from former or current employer plan) to an IRA is suitable for the customer based on the options obtained through reasonable diligence, the customer s specific needs and the customer s investment profile. RETIREMENT PLAN ROLLOVER / Page 3 of 3

4 UNIVERSAL SWITCH LETTER THIS FORM MUST BE USED: (I) FOR EXCHANGES, TRANSFERS, ROLLOVERS OR REPLACEMENTS ACROSS PRODUCT TYPES; AND (II) WHEN RECOMMENDING A CUSTOMER TO ROLLOVER, MOVE OR TRANSFER THE EMPLOYER SPONSORED RETIREMENT PLAN ACCOUNT OR PLAN ASSETS TO AN INDIVIDUAL RETIREMENT ACCOUNT ( IRA ) THROUGH COLORADO FINANICAL SERVICE CORPORATION. SECTION Customer Name: CUSTOMER INFORMATION 2. Account Registration and Account Type: 3. Tax ID Number: 4. Dashboard Account Number: OR Not Assigned SECTION 2. TRANSACTOIN EVALUATION WORKSHEET 1. Please complete all applicable information regarding the transaction that is being effected. If information does not apply, please indicate as Not Applicable. Please ensure that all blanks are fully completed. Existing Investment(s) (Check all that apply) Proposed Investment(s) (Check all that apply) Mutual Fund Variable Annuity REIT/DPP Mutual Fund Variable Annuity REIT/DPP Other : Other : a. Name of Issuer a. Name of Issuer b. Product Name b. Product Name c. Fixed Cost and Charges c. Fixed Cost and Charges d. Invested Amount (less withdrawals) d. Investment Amount e. CDSC/Surrender/Holding Period (remaining) e. CDSC/Surrender/Holding Period f. Liquidation Charges or Schedule (remaining) f. CDSC/Surrender/Holding Schedule g. Optional Features Available and the Cost of Each Feature (list all features even though not currently opted by the customer) g. Optional Features Available and Cost of Each Feature (list all features even though not currently selected by the customer) Check if Opted Optional Features Cost Check if Opted Optional Features Cost h. Existing Investment Redemption was: h. Proposed Investment Product was: Requested by Customer Recommended by Representative Requested by Customer Recommended by Representative i. Other i. Other c. Fixed Cost and Charges - Mandatory cost and fees without adding any additional or optional features. (i.e., 12(b)-1 fees) e. CDSC/Surrender/Holding Period (Required Holding Period) - Period (i.e., surrender period) investor required to hold the investment to not incur any additional fees or charges when investment is liquidated. f. Liquidation Charges or Schedule Either fixed dollar amount or % of the investment to be paid when liquidated or planned to liquidate the investment. g. Optional Features Available and Cost of each Feature Additional features and/or benefits available when/if the customer wishes to add or access such features and/or benefits. 2. ASSESSMENT - Provide the reason(s) for the exchange, transfer or replacement. (Attach additional documentation as needed) (Customer Initial: / / ) SECTION 3. RETIREMENT PLAN ROLLOVER EVALUATION WORKSHEET NOT APPLICABLE Please complete this section when opening a new account for or with the assets moved, transferred or withdrawn from an (either former or current) employer sponsored retirement plan ( the Plan ). Additional transfer or deposit(s) of an (either former or current) employer sponsored retirement plan asset(s) to an existing account with Colorado Financial Service Corporation also requires this section. 1. ROLLOVER ACKNOWLEDGEMENT: With my signature below, I certify that: (i) I am aware of the fact that I can make only one rollover in any 12- month period; (ii) I have discussed the possible tax consequences (including penalties and minimum distributions) of the rollover with a qualified tax professional and/or legal professional (who is/are not the Representative named below) of my choice; and (iii) I understand that, depending on my state s law, once the assets are moved from the Plan, the assets may no longer be protected from creditors. Customer Name: Customer Signature: Date: D041-A / Page 1 of 2

5 2. Rollover the Account or Asset(s) from Former or Leaving Employer Sponsored Retirement Plan ( the Plan ) to an IRA NOT APPLICABLE Full Rollover Partial Rollover Other: a. Does the former or leaving employer permit its leaving employees to leave the money in the Plan? Yes No (customer initial) (customer initial) b. Does the new employer plan allow to rollover the Plan assets to the new employer s retirement plan? Yes No (customer initial) (customer initial) c. If answered Yes to any of the questions above, explain the reason(s) for the rollover or transfer to an IRA. (Customer Initial: ) 3. Rollover the Account or Assets from Current Employer Sponsored Retirement Plan NOT APPLICABLE Full Rollover Partial Rollover Other: a. Explain the reason(s) for the rollover or transfer to an IRA SECTION 4. Customer Acknowledgement: CCERTIFICATION AND EXECUTION (Customer Initial: ) I have reviewed, with my Representative, the advantages and disadvantages of the proposed exchange, transfer, rollover or replacement. In particular, we have: Reviewed and compared the material features of both the existing and proposed investments, such as investment objective, portfolio, historical returns, sales charges, surrender charges, expenses, tax consequences, market risk and other material facts; Discussed any surrender charges or contingent deferred sale charges (CDSCs) (a/k/a back-end loads ) that may be charged for either or both the existing and proposed investments; and Discussed the impact of the proposed transaction on the level of death benefit, if any, available to me from my existing investment; and Discussed the advantages and disadvantages of diversifying my investments among different types of investments and/or product companies including the possible effect on my ability to reach a mutual fund sales load breakpoint. Furthermore, I certify that: I have discussed the possible tax consequences of the exchange, transfer, rollover or replacement with a qualified tax professional of my choice; I have provided or obtained the most current information available regarding the existing investment and provided it to my representative for use in making the proposed investment recommendation; After considering the advantages and disadvantages of the proposed transaction, I have concluded that this transaction is in my best interest based on my personal and financial situation, and my ability to make any future payments that may be required; My representative disclosed that Colorado Financial Service Corporation and my Representative will be paid a commission and/or fees from the product sponsor(s) when the proposed transaction is completed; and I am making an informed decision. The undersigned certifies that all information provided on this form is true, correct and complete. Customer s Signature Date Customer s Signature Date Customer s Signature Date Customer s Signature Date Representative Acknowledgement: The information that is recorded on this document was done so by gathering information from the customer and/or the existing and proposed product sponsor/provider. I certify that I made best efforts to gather needed information to determine that this switch transaction is in the best interest of the customer, given their current investment objectives and needs, and I believe that this transaction is suitable and appropriate. Representative signature certifies that a copy of this Acknowledgement was made available to the customer. Representative will retain a copy in the customer file and forward original to the OSJ Supervisor who is to acknowledge and forward to the Home Office. Representative s Name and Signature Date Representative s Name and Signature Date OSJ Supervisor or Designee s Name Signature Date D041-A / Page 2 of 2