The Latest

SIFMA Requests Good Faith Compliance Reform from the DOL in Light of the Delayed Issuance of the Section 408(b)(2) Final Rule
SIFMA expressed concern in a letter sent on April 16 to the Employee Benefits Security Administration (EBSA) about the delay in the issuance of the final rule under the Employee Retirement Income Security Act (ERISA) section 408(b)(2) and the upcoming effective date. SIFMA had repeatedly urged the EBSA to release the regulation, explaining that in the absence of a final rule, SIFMA members could not complete all of the systems and process work needed to be able to comply. Now that the rule has been issued, but questions of interpretation remain, SIFMA requests that Department of Labor (DOL) provide "good faith compliance" relief from the penalties imposed under ERISA and the excise taxes imposed under the Internal Revenue Code through 2013, unless a longer period of time is appropriate as a result of possible new interpretations reflected in DOL's frequently asked questions (FAQs) which are expected to be issued. In addition, SIFMA offers its assistance in drafting such good faith relief.

SIFMA and Other Associations Submit Comments to House Ways and Means Committee Urging the Preservation of the Employer-Provided Retirement System
SIFMA, along with 28 trade associations, provided comments on April 17 to the U.S. House Ways and Means Committee urging the Committee to preserve the current tax treatment that both encourages employers to offer and workers to contribute to retirement plans. The comments were sent in advance of the Committee's hearing on tax reform and tax-favored retirement accounts. The groups caution that eliminating or diminishing the current tax treatment of employer-provided retirement plans will jeopardize the retirement security of tens of millions of American workers, impact the role of retirement assets in the capital markets, and create challenges in maintaining the quality of life for future generations of retirees.

SIFMA, as Part of a Coalition, Submits Comments to EBSA on Electronic Delivery Guidance Under ERISA
SIFMA, as part of a Coalition of 15 trade associations, provided comments on March 27 to EBSA on electronic delivery guidance under Section 404(a) of ERISA, EBSA's Technical Release 2011-03R. The coalition shares concerns that this interim guidance does not provide meaningful incentives or make it more feasible for employee benefit plan sponsors and their service providers to use electronic media instead of paper. With the compliance date of the participant fee disclosure rule fast approaching, the coalition also points out that the DOL's most recently issued regulatory agenda does not include guidance on electronic disclosure.

SIFMA Submits Comments to the SEC on Financial Literacy Among Investors
The Private Client Legal Committee of SIFMA provided comments on March 23 to the Securities and Exchange Commission (SEC) on the SEC's study regarding financial literacy among investors. Section 917 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) requires the SEC to conduct a study of financial literacy among investors. As the SEC moves forward, SIFMA strongly urges the SEC to recognize that more disclosure is not better disclosure. SIFMA offers detailed recommendations, in particular, the study should consider the ways investors use and access information from their service providers, particularly in light of technological advances that should be harnessed to improve delivery of information to investors.

SIFMA Submits Comments to the MSRB on Electronic Dissemination of 529 College Savings Plan Disclosure Documents
On April 2, SIFMA provided comments to the Municipal Securities Rulemaking Board (MSRB) on and MSRB Concept Proposal for Electronic Dissemination of 529 College Savings Plans Disclosure Documents, MSRB Notice 2012-10. SIFMA supports the MSRB's concept proposal to permit the dissemination of 529 College Savings Plan disclosure documents electronically, as it does for other municipal securities, by brokers, dealers, and municipal securities dealers serving as primary distributors. SIFMA notes that MSRB's Electronic Municipal Market Access System (EMMA) has been extremely beneficial to investors and other market participants to have market data and primary and secondary market disclosures freely available in a single location, and could serve as a platform for 529 plan disclosures.

Legislative Watch

House Ways and Means Committee Discusses Retirement Plans and Savings in Context of Tax Reform
At a House Ways and Means Committee hearing on April 17, lawmakers discussed current options for retirement savings with respect to employer-based defined contribution plans and with respect to IRAs. Chairman Dave Camp (R-Mich.) said "I believe there are three important principles to keep in mind when evaluating tax-favored retirement vehicles: (1) simplification; (2) increased participation, particularly by low and middle-income taxpayers; and (3) whether the tax benefits are effective and properly targeted." Ranking Member Sander Levin (D-Mich.) said the basic structure "of our current system should be preserved, and that this structure should not be repealed to pay for tax reform." Rather than acting as an opportunity to find revenue, tax reform should strengthen the current retirement savings system and expend participation, said Levin. A full summary of the hearing can be viewed here.

Senate Banking Subcommittee Examines Automatic Enrollment
At a Senate Banking Subcommittee on Economic Policy hearing on March 28, members discussed the retirement savings gap for Americans. Chairman Jon Tester (D-Mont.) said in his opening statement that the current retirement savings deficit is in the trillions. Ranking Member David Vitter (R-La.) expressed concern that the Federal Reserve Board's zero interest rate policy is detrimental to Americans' retirement security. A full summary of the hearing can be viewed here.

House Financial Services Subcommittee Holds Hearing on SEC Oversight; Rep. Royce Asks Chairman Schapiro About Fiduciary
At a House Financial Services Subcommittee on Capital Markets and GSEs hearing on April 25, lawmakers heard from SEC Chairman Mary Schapiro on a number of activities being undertaken by the SEC. Several topics were discussed at the oversight hearing, including the SEC's progress on implementing the Dodd-Frank Act, the cost-benefit analysis of rulemakings, and money market fund (MMF) reform proposals. Rep. Ed Royce (R-Calif.) referenced the DOL's fiduciary proposal which may be released this summer and asked whether the SEC had any concerns about proposal's implications beyond the DOL's jurisdiction. Schapiro raised three primary concerns with the DOL proposal. First, whether business conduct standard rules by the CFTC would conflict with DOL rules regarding swap dealers possibly engaging in fiduciary conduct. Schapiro referenced guidance by the DOL that stated the rules are not in conflict and would not cause swap dealers to become fiduciaries. Second, whether there may be a potential conflict with the DOL proposal as it relates to investment advisors and broker-dealers being designated a fiduciary when providing advice; and third, whether broker-dealers who provide advice on IRA accounts would be fiduciaries under ERISA, which she noted was a major point of contention for the securities industry. A full summary of the hearing can be viewed here.

Regulatory Watch

SEC Adopts Rule Defining Swaps-Related Terms for Regulating Derivatives
At an open meeting on April 18, the SEC approved the joint final rules for the definitions of "Swap Dealer," "Security-Based Swap Dealer," "Major Swap Participant," "Major Security-Based Swap Participant," and "Eligible Contract Participant." The SEC unanimously voted in favor of the joint entity definitions rule. The Commodity Futures Trading Commission (CFTC) approved the rule by a vote of 4 to 1 during a concurrent open meeting. In her opening statement, SEC Chairman Mary Schapiro said the SEC believes "that both the $3 billion de minimis threshold and the $8 billion phase-in level for credit default swaps (CDS) ensure that the vast majority of notional dealing activity in this market is subjected to the SEC's Title VII dealer regulatory regime, consistent with the statutory de minimis exception." Schapiro said the SEC is "very aware of the importance of providing market participants with an implementation roadmap and 'rules of the road' for cross-border issues before requiring dealer and major participant registration." A full summary of the meeting can be viewed here.

State Issues

SIFMA and other Associations Submit Comments to the California Senate on Legislation Creating State-Run Retirement Savings Plans
SIFMA and 10 other associations provided comments on April 3 to the California State Senate on legislation that would create a state-run retirement savings plan for private sector workers and guarantees a set rate of return on investment, SB 1234. The bill would mandate employers with five or more employees to automatically enroll their workers into the state-run plan unless a retirement savings option is already available at the workplace with penalties for non-compliance. The groups point out California is already facing a massive unfunded pension liability for its public sector workers. In addition, the groups caution that this is not the time for the state to create and assume liability for any new plan for private sector employees, much less one which guarantees a set rate of return on investment.

Noteworthy Facts & Figures

GAO Releases Report on Defined Benefit Pension Plans: Recent Developments Highlight Challenges of Hedge Fund and Private Equity Investing
The Government Accountability Office (GAO) published a previously restricted report reemphasizing a 2008 recommendation that the DOL provide guidance for defined benefit plans investing in alternative investments. The GAO has noted in recent years that plans may face significant challenges and risks when investing in alternative assets. These challenges and ongoing market volatility have raised concerns about how these investments have performed since 2008. The GAO analyzed available data, interviewed relevant federal agencies and industry experts, conducted follow-up interviews with 22 public and private pension plan sponsors, and surveyed 20 plan consultants, academic experts and other industry experts.

A Look Ahead

SIFMA and Cleary Gottlieb Steen & Hamilton Will Host a Half-Day Workshop: "External Business Conduct Standards: Practical Insights for Adapting to Title VII Regulatory Requirements"
Cleary and SIFMA will host a workshop the morning of May 16, 2012 at the SIFMA Conference Center, 120 Broadway, New York, NY. With the passage of the CFTC's final rules, the challenges presented by implementation and compliance will be numerous and far reaching. In many instances, we have more questions than answers – whether relating to new disclosure/diligence obligations, special entity guidelines, and the interplay with DOL fiduciary regulations. Cleary and SIFMA will hold this workshop to help sift through the complex issues associated with the rule, and provide practical insights on preparing for compliance.
Please click here to register for the workshop.

California Senate Appropriations Committee to Hold Hearing on Legislation Creating State-Run Retirement Savings Plans
CA SB 1234, legislation that would create a state-run retirement savings plan for private sector workers and guarantees a set rate of return on investment, was reported out of the Senate Labor Committee on April 25 by a vote of 4-1. SIFMA was one of a number of organizations that testified in opposition. SIFMA was pleased that, while the vote does not reflect it, the fairly detailed discussion prior to the vote suggested that members on both sides of the aisle have questions and concerns about the bill. The legislation will be considered in the Senate Appropriations Committee next, possibly as early as the week of April 30.

SIFMA Launches "Proxy Resource Center" for Retail Investors
SIFMA is proud to launch our new Proxy Resource Center, a user-friendly source of unbiased information about the importance and mechanics of the proxy process, geared for retail investors. Explore it yourself as you vote your own proxies, or contact SIFMA for more information about referring your clients to the site.