correting a benefits, rights, and features failure

[K2retire]

The firm I work for has a TPA service and also a financial advisory division. Prior to moving to our services a few years ago, a client had permitted a group of owner-employees to establish self directed brokerage accounts. We have no knowldege of whether or not other employees were ever given this option. The current enrollment materials make no mention of this option, instead listing only the funds available on the platform where the other accounts are held.

As part of a self correction for one of the accounts that was set up incorrectly, and allowed an inappropriate distribution, we're establsihing policies and procedures for participants wishing to establish such accounts. (The money was repaid as soon as we saw the statement.) A couple of problems have come up in the process:

1. The financial advisor has already told the client that the procedures will only apply to new SDBAs because the existing accounts are grandfathered.

2. The client has indicated that they don't want to distribute this information to all employees for fear that it will prompt more of them to establish SDBAs.

I know that both of those issues are a problem, but I need help finding a succinct reference to why they can't do what they want (especially the financial advisor who is considerably higher up the food chain here than me).