More On Legal & Compliancefrom The Advisor's Professional Library
- The Few and the Proud: Chief Compliance Officers CCOs make significant contributions to success of an RIA, designing and implementing compliance programs that prevent, detect and correct securities law violations. When major compliance problems occur at firms, CCOs will likely receive regulatory consequences.
- Agency and Principal Transactions In passing Section 206(3) of the Investment Advisers Act, Congress recognized that principal and agency transactions can be harmful to clients. Such transactions create the opportunity for RIAs to engage in self-dealing.
The Financial Services Institute and Financial Services Roundtable are pressuring the Department of Labor to release a “progress report” on the department’s redrafting of its rule amending the definition of fiduciary under ERISA, citing a list of criteria lawmakers laid out for DOL to adhere to in reworking its reproposed rule.
But a spokesman for DOL’s Employee Benefits Security Administration told AdvisorOne on Tuesday that EBSA will not be releasing a “progress report” before its fiduciary reproposal is released. “Our reproposal, when complete, will provide ample opportunity for public comment, both on the proposed rule itself and on our assessment of its likely effects,” the DOL spokesman told AdvisorOne.
EBSA’s regulatory agenda for 2012 says its reproposed rule amending the definition of fiduciary under the Employee Retirement Income Security Act is projected to be released in May.
Dale Brown (left), FSI’s president and CEO, said in a statement that “All along, FSI has called for DOL to ‘withdraw and re-propose,’ not withdraw and walk away. So we fully expected and urged DOL to come back with a more appropriate rule based off a true picture of the problem they’re trying to solve. Letters from a long, bipartisan roster of members of Congress reinforce the same desire to get these rule changes right. Yet, we still have no idea what the problem is, while we’re told they are working on a solution."
In response, the DOL spokesman said that the “problem [DOL] is addressing in the re-proposal has been clear since this process began–to help retirement plans and IRA owners get good, reliable investment advice–advice that puts their interests first. We are making good progress as we make every effort to get this right.”
FSI and the Financial Services Roundtable cited two letters sent by more than 50 House Republicans and 30 House Democrats to DOL regarding the department’s attempt to redefine the term “fiduciary.” The letters directed the department to follow a set of criteria while writing its new rule.
Industry sources say “key committees” with oversight of retirement planning issues are contemplating calling Phyllis Borzi, assistant secretary of labor for EBSA, to testify about EBSA’s progress in re-crafting its fiduciary rule.
Brown with FSI said that “We should all know now if the DOL is following the commonsense, bi-partisan criteria that Republican and Democratic members of the House demanded they follow during this process. The DOL should update the public soon on their progress.”
The criteria lawmakers set out for DOL in the two letters are as follows:
- It is carefully and effectively targeted to address well-defined and documented problems in the retirement planning advice business;
- It clearly recognizes that IRA accounts are significantly different from employer-sponsored plans because the IRA investor has nearly a limitless choice among service providers and investment products;
- It ensures that plan participants and plan sponsors continue to be able to receive the critical information needed to expand retirement savings and coverage;
- It preserves investor access to and choice among suitable financial products and services delivered by qualified financial professionals;
- It avoids costly new regulatory requirements that exceed their proven benefits for investors;
- It does not compound the investor confusion that the Securities and Exchange Commission’s recent study under the Dodd-Frank Act identified as the primary problem for retail investors. Effective regulation must add to the public certainty, not diminish it;
- It is narrowly drafted to address well-defined and documented concerns;
- Preserves the access of IRA owners and plan participants to investment services delivered by qualified financial professionals using whatever business model best fits the investor's objectives; and
- Ensures that companies can receive the investment information they need to establish plans and offer sound investment offers to their employees.