Participant's son as broker

[SMB]

(I'm sure this has been discussed previously. I did a quick scan of this forum, but couldn't find anything "on point". If someone could provide a link to a previous discussion of this (or similar) subject, I'd be most appreciative.)

PS Plan is being amended to allow participant direction of investments.

One participant would like to have her son (a broker) handle her account. I have a faint recollection that such a relationship might be a PT. I am assuming this would be where the participant's account is maintained with the son's brokerage firm and where son receives commissions on trades.

What if the participant maintained an account with a discount broker and son merely provided Mom with investment advice, on a non-compensated basis?

Thanks for any and all comments.

[JanetM]

Normally participant directed accounts use the same broker as the assets must stay in plan trust account.

[Guest Sieve]

If son is receiving no commissions or other compensation, and is merely giving advise to mother with respect only to mother's account's assets, and there is no conflict of interest with respect to plan assets, then I see no PT. (But, PTs do pop up in the most unsuspecting places, so I hope others give their thoughts.)

[GBurns]

Although I think that it is prohibited, I am not sure. But, I recall this as a issue that was well discussed on one of these Forums.

But even if it is not a PT from a plan perspective, I recall that there is an NASD rule and a state securities rule prohibiting this, so the brokerage firm would not allow it, assuming that they noticed it.

[K2retire]

Although I think that it is prohibited, I am not sure. But, I recall this as a issue that was well discussed on one of these Forums.

But even if it is not a PT from a plan perspective, I recall that there is an NASD rule and a state securities rule prohibiting this, so the brokerage firm would not allow it, assuming that they noticed it.

George, brokers rely on friends and family members to have a client base. Is there something specific about retirement plans that contradicts that?

I agree with Janet that the funds are likely to have to remain with the plan's brokerage firm.

As for advising Mom behind the scenes without commission, I can't imagine how that could be prevented. But the intention is probably for him to get paid.

[GBurns]

Relying on cose family members for referrals with which to build a client base is different from making sales to those relatives. Friends are obviously a different issue.

It is not the retirement plans that are different, it is that the laws governing the sales of securities and investment advice are different. They have nothing to do with retirement plans.

There are even some insurers who place restrictions on sales to close family members.

I have not been NASD licensed for some time, so I cannot tell you in which rule and on which disclosure form such restrictive wording appears, but it should be on the initial application for an account. Or as a knowledgeable liscensee and see what they tell you about selling or advising close relatives.

[K2retire]

Thanks for the info. I don't have a securities license, nor do I plan to get one but what you are saying is contrary to what every broker I've ever known has done, so I was curious.