The advisers wanted to get control of the money so they could earn commissions on it.  He lost the 457 exception when he rolled it over to the IRA, but he gained a FINRA case if he can prove it was done on their advice.

Incidentally, a client who left her funds in a 457 (Nationwide) had to fight them two years in a row to get the code changed from 1 to 2.  The company told her to use the Form 5329.  I told them where to put it.