Castle Rock Investment Company

Independent Guide, Trusted Partner.

SEC

Declaration of Independence

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“Can you be more specific?”

Embarrassing, but true: the retirement industry is asking that of the US government.

The definition of a Fiduciary needs to be more specific because of cases where Plan Sponsors are legally charged unreasonable fees for a long time, but the Department of Labor’s interpretation is undesirable to Wall Street. Of course, Wall Street is on the receiving end of these unreasonable fees.

As an investment advisory firm who identifies in writing as a fiduciary to our clients, we uphold the interests of our client above those of any other interest, because we have no other interested parties. The unfortunate reason that other investment advisors will not agree to sign a fiduciary agreement with a client is because they are “promised” to a large company, who profits from a retirement plan through hidden fees.

While the Plan Sponsor is unaware of this other agreement, and often the Investment Advisor is not entirely upfront about this agreement with the Plan Sponsor’s representatives, it comes out in the end through hidden fees and a whole mess of ugly policies.

The sort of game run here should be illegal. Not because the Plan Sponsors are not careful, instead they often are smart and diligent, but because they are simply not protected by the law. Up to this point, the law is unclear. The Independent Advisor they supposedly hire is not, after all, independent according to a stricter definition now proposed by the Department of Labor, led by Phyllis Borzi.

Insist upon a clear definition of an independent advisor so that you know your advice comes for the interest of your retirement plan, and not for the interest of someone else’s quasi-legal activity. Sign the petition at http://www.thepetitionsite.com/414/401/760/tell-washington-to-stand-up-to-wall-street/

 

Michele L. Suriano, Accredited Investment Fiduciary™, is president of Castle Rock Investment Company, a woman-owned SEC registered investment advisory firm serving qualified retirement plans. www.CastleRockInvesting.com

Risk Management: Employee Retirement Plans

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Risk ManagementCastle Rock jumps through hoops to be among the best investment advisors. Not every investment advisor goes through the same rigorous training because these hoops are not legally required. We do not think that making best practices a legal requirement will diminish our status as one of the best firms around, but we do think that selecting an investment advisor should be less risky for Plan Sponsors.

You are supposed to be careful of sales pitches that avoid using the term “fiduciary” but stress “education” instead, because those are not interchangeable services. The difference between these services would be like exchanging accounting for bookkeeping services, or medicine with surgery, or heads with tails in a coin toss. Providing education does not negate a need for a fiduciary; rather, a fiduciary investment advisor should be around for cases where education does not meet the plan’s needs, and an expert opinion is necessary.

How confident are we that Castle Rock is the place to turn? We are the best retirement investment advisor around. You can check our About Us section to be sure, or better yet Contact Us.

Our qualifications exceed all of these expectations, but you may want to check to see if your own advisor is able to eliminate some of the risks to you as a plan sponsor[1]:

  1. At least 50% of assets under management in qualified retirement plans (ours are 99%);
  2. Has an Accredited Investment Fiduciary™ or similar designation;
  3. SEC Registered Investment Advisor (RIA);
  4. Make sure your advisor has been working in the industry for at least a decade;
  5. Get a fee agreement that clearly states how the fees will be charged; and
  6. Make sure that fiduciary status is in writing.

To show your support for conflict-free advice in all retirement plans, please sign the petition here at: http://www.thepetitionsite.com/414/401/760/tell-washington-to-stand-up-to-wall-street/

 

Michele L. Suriano, Accredited Investment Fiduciary™, is president of Castle Rock Investment Company, a woman-owned SEC registered investment advisory firm serving qualified retirement plans. www.CastleRockInvesting.com

When Is a Buck Not a Buck?

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Note:  This is a follow up piece to our August 15th interview with an industry expert regarding the recently adopted SEC reforms.

In the wake of the Lehman Brothers failure in September of 2008, the Reserve Primary Fund, the oldest money fund in the nation, “broke the buck” and fell to 97 cents per share. On September 17, 2008, investors redeemed a record $140 billion from money market funds and the commercial paper market, which banks rely on to fund their day-to-day business, essentially froze. The Treasury stepped in to establish the voluntary Money Market Funds Guarantee Program in order to stop the run on money market funds, but vowed never to do so again.

The Securities and Exchange Commission was obliged to do something. On July 23, 2014, the SEC adopted amendments to the rules that govern prime money market mutual funds. The SEC aims to re-tool institutional money markets behavior by using a combination of floating Net Asset Value (NAV), fees and gates to protect investors and the financial system.

[Read more…] about When Is a Buck Not a Buck?

Coming Up: Recently Announced Money Market Reform

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Friday, August 15, Michele Suriano (President of Castle Rock Investment Company) and I spoke with an industry insider and expert about the recently adopted SEC money market funds reforms. We covered the following key subjects:

  • Floating Net Asset Value
  • Redemption fees (discretionary and default)
  • Discretionary redemption restrictions
  • Disclosures to retirement plan participants
  • Definition of “retail” MMFs

Look for our blog post Tuesday about the reforms.

Do you have questions about what the “key subjects” even mean? Are you an expert with your own opinion about these reforms? Reach out to me at Katherine@CastleRockInvesting.com! We look forward to sharing more with you.

— Katherine Brown, Research Associate at Castle Rock Investment Company

SEC Study Recommends Fiduciary Standard

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On the night of January 21st, 2011 the SEC submitted to Congress a staff study recommending a uniform fiduciary standard of conduct for broker-dealers and investment advisers when they provide personalized investment advice about securities to retail investors.

 Why did the Dodd-Frank Act require this study?

Most Americans do not know the difference between a broker and an adviser nor do they understand the critical differences between the fiduciary standard and suitability standard.

A fiduciary standard refers to the duty to serve the best interests of its clients, including an obligation not to subordinate clients’ interests to its own.  Included in the fiduciary standard are the duties of loyalty and care.

The suitability obligation generally requires a broker-dealer to make recommendations that are consistent with the interests of its customer.

 So, who’s too scared to be a fiduciary?

We will find out in the second quarter when the SEC is scheduled to publish proposed regulations to provide that:  “the standard of conduct for all brokers, dealers, and investment advisers, when providing personalized investment advice about securities to retail customers (and such other customers as the Commission may by rule provide), shall be to act in the best interest of the customer without regard to the financial or other interest of the broker, dealer, or investment adviser providing the advice.”

The next few months will exemplify the moral fortitude of our regulators.

 

SIPC is Not the FDIC*

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SIPC is not the securities world equivalent of FDIC.  With a reserve of slightly more than $1 billion, SIPC could not keep its doors open for long if its purpose was to compensate all victims in the event of loss due to investment fraud.

Securities Investor Protection Corporation was created by congressional charter in 1970.  Their mission is to return customer’s cash, stock, and other securities when a brokerage firm is closed due to bankruptcy or other financial difficulties and customer assets are missing.

Without SIPC, investors at financially troubled brokerage firms might lose their securities or money forever or wait for years while their assets are tied up in court.
Please remember that SIPC does not insure against investment fraud or the risks inherent in investing.  All of the information above and more is available on their website at www.sipc.org.