Vail Daily letter: Harmful ruling |

Vail Daily letter: Harmful ruling

The following is information concerning a ruling by the Department of Labor that would hurt anyone trading options in a retirement account. That includes very basic strategies such as covered calls or selling cash secured puts. It will limit your ability to make money in your retirement account.

The U.S. Department of Labor has proposed a rule that it believes will reduce conflicts of interest between financial professionals/firms and retail investors seeking advice in their Individual Retirement Accounts. The rule would establish a strict “best interest” standard for advice relating to IRAs that, among other things, would prohibit the use of options in broker-advised retirement accounts.

The DOL rule includes numerous detailed, complex conditions that would negatively impact retail investors like you, including limiting your investment choices.

As a result of this rule, many tools, research, and information services that were previously viewed as guidance or education will likely be deemed “advice” and subject to the fiduciary “best interest” standard. This means, without changes to the rule as it currently stands, your account, if considered a broker-advised IRA, would no longer be eligible for options trading. In order for you to continue to trade options in your IRA, we would likely need to remove most research, tools, and educational resources so your account would not be considered a broker-advised IRA. Or, we could convert your account to a fee-based investment advisory account in which options could be used. The first approach may limit your ability to make informed trading decisions and the second would likely increase your costs.

These IRA options issues arise because, for the first time in history, the DOL is proposing a limited list of “permitted assets” in broker-advised IRAs. Options are not on this list. So even if a brokerage firm were willing to restructure its business to fit within the strict conditions of this rule, it could not allow the use of options in broker advised accounts.

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This ruling will hurt millions of retires that make ends meet by trading options in their retirement accounts. We all need more choices for growing our retirement accounts not less choice. Please voice your concerns about this ruling.

Annie Goodman

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