Fiduciary Rule Proposal – Principal Transactions

SIFMA is pleased to provide comments regarding the Department of Labor’s (“Department”) proposed exemption under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and section 4975 of the Internal Revenue Code (“Code”) for certain principal transactions in debt securities between a plan or an IRA (and other individual accounts) and its investment advice fiduciary. SIFMA appreciates the opportunity to comment and hope that our comments are helpful to the Department as it assesses the impact of the proposed exemption on IRAs, plans and their participants. SIFMA shares the Department’s interest in making sure that plans and IRAs are treated fairly in the market place and have the ability to trade effectively and efficiently in all markets.

The proposed exemption, as drafted, covers all plans and IRAs where the fiduciary financial institution is providing investment advice, and does not have discretionary control. SIFMA believes it is appropriate that the exemption covers all plans and IRAs, and we believe that the limitation on discretionary fiduciaries is consistent with the other proposals made by the Department.

SIFMA is concerned however, that the proposed exemption will have a deleterious effect on prices in the bond market for plans and IRAs. The delays, the lack of liquidity from taking large dealers out of the market, the costs of agency transactions, and the work-arounds to avoid riskless principal transactions all add to pricing inefficiencies. SIFMA does not understand how such a strikingly bad result could be in the interest of participants. Nor do we believe that the Department’s cost analysis has identified or correctly analyzed these costs.

See Also:

United States Department of Labor: Conflict of Interest Proposed Rule

See Also:

• Executive Summary
• The Fiduciary Rule Itself
• Best Interest Contract Exemption (BIC exemption)
• Prohibited Transaction Class Exemption (“PTCE”) 86-128
• Prohibited Transaction Class Exemption (“PTCE”) 84-24
• Prohibited Transaction Class Exemption (“PTCE”) 75-1, Part V
• Additional Exemptions
• Asset Management Group
• NERA Analysis: Comment on the Department of Labor Proposal and Regulatory Impact Analysis
• Deloitte Report on the Anticipated Operational Impacts to Broker-Dealers of the Department of Labor’s Proposed Conflicts of Interest Rule Package