July 14, 2017
[email protected]
U.S. Department of Labor
200 Constitution Avenue, N.W.
Washington, DC 20210
Re: RIN 1210-AB82
Ladies and Gentlemen:
The Securities Industry and Financial Markets Association (“SIFMA”)1 appreciates the opportunity to respond to the Department of Labor’s (“Department”) “Request for Information Regarding the Fiduciary Rule and Prohibited Transaction Exemptions,” published in the Federal Register on July 6, 2017. We strongly urge the Department to delay the January 1, 2018 applicability date of the provisions in the Best Interest Contract Exemption, the Principal Transaction Class Exemption, and Prohibited Transaction Exemption 84-24 relating to the redefinition of the term “fiduciary” under section 3(21) of ERISA and section 4975(e) of the Code (the “Rule”) that are not now in effect, along with the other amended exemptions as part of this rulemaking. We believe the Rule has caused, and will continue to cause, significant disruption, loss of services and loss of choice for retirement investors. These negative consequences will be exacerbated if the exemptions, as finalized in April 2016, take effect on January 1, 2018.
As discussed more fully below, the Department must complete the reexamination of the Rule and the related exemptions mandated by the President’s February 3, 2017 Memo and allow for sufficient time to craft more sensible and workable rules that, at a minimum, do not reduce access to critical retirement services. These rules should not require financial institutions to create expensive manual and technological workarounds solely to meet the Department’s unique view of how individuals should save for retirement.
Finally, the reexamination and resulting reproposals need to be considered in close coordination with the SEC in order to (i) take advantage of the SEC’s vast expertise in this area; (ii) harmonize the standards for retail investors; and (iii) ensure that financial institutions (and investors) are not subject to substantially different regulatory mandates with respect to the same investment transaction.
Executive Summary
The Department should issue a delay of the January 1, 2018 applicability date of the exemptions as soon as possible for the following reasons:
• To allow time for the Department to complete review of the entire Rule per the President’s Memo (as defined below);
• To allow firms time to implement systems that will operationalize the Rule while easing transitions for their clients;
• To allow the Department and the SEC to craft a solution that works for all investors; and
• To ensure individuals will continue to receive the help necessary to save for retirement so they do not suffer unnecessary financial losses due to lack of assistance.
Accordingly, it is critical that the Department delay the January 1, 2018 date by a minimum of 24 months after completion of the review and publication of final rules. Piecemeal delays cause retirement investors confusion, uncertainty and additional cost. They cause financial institutions enormous additional costs to create systems which may never be needed, and make it hard to run a business that requires legal certainty. Successive short delays will harm investors and institutions.
1 SIFMA is the voice of the U.S. securities industry. We represent the broker-dealers, banks and asset managers whose nearly 1 million employees provide access to the capital markets, raising over $2.5 trillion for businesses and municipalities in the U.S., serving clients with over $18.5 trillion in assets and managing more than $67 trillion in assets for individual and institutional clients including mutual funds and retirement plans. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA). For more information, visit http://www.sifma.org.