The ERISA requires fiduciaries of pension plans to perform certain due diligence on service providers and plan investments. This helps ensure that the fiduciary is acting in the best interest of the plan's participants. In 2010, the DOL proposed a change to the definition of fiduciary under ERISA that would have expanded the scope of those who become fiduciaries, which will capture more of the current services of 401(k) and IRA providers. This proposal would have forced investors from commission-based accounts to fee-based advisory accounts that could ultimately lead to a number of negative consequences for individual investors, including limiting investor choice, limiting investor access to education regarding retirement accounts, and increased costs for saving.
After significant objections were raised by SIFMA and numerous other groups, as well as Members of Congress from both parties, the DOL withdrew its initial proposal and stated it would conduct further economic analysis. In February 2015, President Obama announced that the DOL should move forward with its proposed rulemaking. On April 14, 2015, the DOL announced a re-proposal of the rule, which was followed by a period for public comment. The DOL received 3,530 substantive comment letters on its proposal - more than ten times the amount it received in 2010. In addition, 281 Members of Congress raised concerns regarding the proposal. On January 28, 2015, the DOL sent the final rule to the Office of Management and Budget (OMB). The OMB has up to 90 days to complete its review of this significant regulatory action. If approved, the final rule will then be published in the Federal Register. Under the Congressional Review Act, “major rules” must be sent to Congress and the Government Accountability Office (GAO) for review and may not be enacted until 60 days after it has either been received by Congress or published in the Federal Register, whichever is later.
SIFMA Fiduciary Standard Resource Center
After a careful review, SIFMA submitted comments to the Department of Labor (DOL) in response to its proposed retirement regulation, stressing concerns that the proposed rule will harm investors by limiting access to financial guidance, reducing choice and ultimately raising the cost of saving for retirement.
SIFMA agrees with the DOL that more can be done to help Americans save for retirement and that there should be a best interests standard in place. However, the rule as written completely misses the mark. SIFMA’s comments reflect our ongoing concerns that the DOL’s proposal would cause harm – particularly to low and middle-income retirement savers – by limiting investors’ access to choice and guidance, while raising the cost of saving.
SIFMA has proposed a Best Interests Standard for Broker-Dealers, which, if adopted, would establish a best interests standard for broker-dealers serving retail clients. This proposal follows the industry’s long established support for such a standard.
Regulators must also consider the fact that the brokerage industry is highly regulated by the U.S. Securities and Exchange Commission (SEC), the Financial Regulatory Authority (FINRA), and state regulators, including with respect to retirement accounts, and in particular, recent guidance by FINRA with respect to rollovers.
SIFMA Comment Letters and Studies
Best Interests Standard for Broker-Dealers