AAG Fiduciary Recommendation Disclosure

Last Updated: September 13, 2023
Effective Date: August, 2023

AAG Fiduciary Recommendation Disclosure for Covered ERISA and IRA Accounts

Overview

This AAG Fiduciary Recommendation Disclosure for Covered ERISA and IRA Accounts (“AAG Fiduciary Recommendation Disclosure”) provides additional information to employee benefit plans subject to Title I of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and plans subject to Section 4975 of the Internal Revenue Code of 1986, as amended (the “IRC” or the “Code“) in respect of certain recommendations made by AAG Capital. Inc. (“AAG,” “us,” “our,” or “we”) and its wealth advisors or portfolio managers, in their capacity as associated persons of AAG (“AAG Brokers” and such plans, collectively, “Plan Customers”).

Where AAG or an AAG Broker provides individualized investment advice for purposes of ERISA or Section 4975 of the Code when making an AAG Fiduciary Recommendation (as defined below), AAG (and the relevant AAG Broker) is a fiduciary within the meaning of ERISA for those Plan Customers subject to Title I of ERISA, and Section 4975(e)(3) of the Code for those Plan Customers subject to Section 4975 of the Code.

In addition to this AAG Fiduciary Recommendations Disclosure, Plan Customers should also carefully review AAG’s Regulation Best Interest Disclosure Statement for additional disclosure and information related to AAG Fiduciary Recommendations.

Where AAG makes AAG Fiduciary Recommendations to a Plan Customer, it may rely upon one or more exemptions, including, among others, Prohibited Transaction Exemption 2020-02 from rules under Title I of ERISA and/or Section 4975 of the Code, as may be applicable (“PTE 2020-02”), that are intended to regulate conflicts of interests. PTE 2020-02 is designed to permit AAG and AAG Brokers to provide AAG Fiduciary Recommendations in your Best Interest (as defined below) under a fiduciary standard of care (as defined under ERISA and the Code) while adhering to prescribed conditions designed to mitigate conflicts.

AAG Fiduciary Recommendations

From time to time, AAG or an AAG Broker will make recommendations in connection with Plan Customer’s potential investment in a privately offered registered or unregistered investment or investment vehicle, Plan Customer’s risk profile (“Risk Profile”), as applicable, or Plan Customer’s decision to roll over or transfer assets from an account subject to Title I of ERISA or other individual retirement account (“IRA”) to an IRA (“Rollover Decision. AAG Fiduciary Recommendations that may be covered by PTE 2020-2 may be afforded relief under other exemptions from ERISA’s and the Code’s conflict of interest rules. From time to time, AAG and its affiliate may utilize one or more other prohibited transaction exemptions, to the extent they may be necessary or appropriate.

Requirements under PTE 2020-02

The way AAG and AAG Brokers make money creates some conflicts with the interests of Plan Customers, so AAG and AAG Brokers may operate under PTE 2020-02 with respect to AAG Fiduciary Recommendations. PTE 2020-02 requires AAG and AAG Brokers to act in the Best Interest (as defined below) of the Plan Customer, without placing the interest of AAG or the AAG Broker ahead of the interest of the Plan Customer.

Under PTE 2020-02’s provisions, AAG and AAG Brokers must:

  • Meet a professional standard of care when making investment recommendations (give prudent advice);

  • Never put our financial interests ahead of Plan Customer’s when making recommendations (give loyal advice);

  • Avoid misleading statements about conflicts of interest, fees, and investments;

  • Follow policies and procedures designed to ensure that we give advice that is in Plan Customer’s best interest;

  • Charge no more than is reasonable for our services; and

  • Give you basic information about conflicts of interest.

“Best Interest” for this purpose means that, with respect to AAG Fiduciary Recommendations, AAG and the AAG Broker must act in accordance with a standard of prudence as set forth under ERISA based on the investment objectives, risk tolerance, financial circumstances and needs of Plan Customer and that neither AAG nor the AAG Broker may place the interests of AAG, the AAG Broker or other party ahead of the Plan Customer. In addition, neither AAG nor the AAG Broker may make statements to Plan Customer that are materially misleading, and neither AAG nor any AAG Broker will be insulated or relieved of liability that is imposed upon either as a fiduciary under ERISA and the Code, as may be applicable, when making AAG Fiduciary Recommendations. When effecting transactions arising out of AAG Fiduciary Recommendations, AAG and the AAG Broker must seek to obtain best execution in accordance with applicable securities rules. Finally, the compensation AAG and the AAG Broker receive directly or indirectly arising out of any AAG Fiduciary Recommendation must not exceed reasonable compensation under applicable ERISA guidance and related guidance under the Code. Under the exemption, AAG is required to establish, maintain and enforce written policies and procedures prudently designed to ensure satisfaction of these “Impartial Conduct Standards.” PTE 2020-02 also contains additional requirements concerning our compliance. For more information, see https://www.federalregister.gov/documents/2020/12/18/2020-27825/prohibited-transaction-exemption-2020-02-improving-investment-advice-for-workers-and-retirees.

Conflicts of Interest

The way AAG and AAG Brokers make money creates some conflicts with the interests of Plan Customers. For this purpose, a conflict of interest is defined as “an interest that might incline a financial institution or an investment professional– consciously or unconsciously – to make a recommendation that is not in the Best Interest of the Retirement Investor.”

Where possible, AAG has taken steps to mitigate or eliminate material conflicts of interest associated with AAG Fiduciary Recommendations.

For the avoidance of doubt, unless otherwise specifically agreed in writing, when making AAG Fiduciary Recommendations, none of AAG, its affiliates nor any of their respective employees, officers, directors, or agents (including AAG Brokers) is providing investment advice or otherwise acting as a fiduciary under the Investment Advisers Act of 1940, as amended.