More On Legal & Compliancefrom The Advisor's Professional Library
- Nothing but the Best Execution Along with the many other fiduciary obligations owed by RIAs, firms owe a duty to seek best execution of clients transactions. If they fail to do, RIAs violate Section 206 of the Investment Advisers Act.
- 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.
Efforts by members of Congress to slow the Department of Labor’s reproposal of its fiduciary rule will have little to no effect, Phyllis Borzi, assistant secretary of DOL’s Employee Benefit Security Administration, said Tuesday.
A bill introduced by Rep. Ann Wagner, R-Mo., that will be marked up by the House Financial Services Committee on Wednesday, requires that the DOL wait to publish its fiduciary rule for 60 days after the Securities and Exchange Commission releases its fiduciary rule proposal.
When asked after her remarks at the Insured Retirement Institute's regulatory conference in Washington if DOL was going to wait for the SEC to publish its rule, Borzi (right) exclaimed: “Of course not.”
DOL, Borzi told reporters, “began working on its rule” to amend the definition of fiduciary under the Employee Retirement Income Security Act “before Dodd-Frank.” DOL, she said, is “coordinating very closely with the SEC to make sure we don’t have outright conflicts," adding that it was ludicrous for lawmakers to think that "one statute is more important than another."
Twenty-nine members of the Congressional Black Caucus, two from the Hispanic Caucus and one from the Asian Pacific Caucus told Seth Harris, DOL’s acting secretary, in a June 14 letter that DOL’s reproposal should be executed “carefully, prudently and in conjunction with the SEC to avoid uncertainty and disruption” in the retirement marketplace. The caucus members said they were jointly concerned that the reproposed fiduciary definition could “restrict our constituents’ access to professional financial advisors.”
Borzi told reporters that while the DOL “shares” members of Congress’ concerns, and is being “cautious” in its redraft, the feedback lawmakers have given is not slowing the release of the redraft in a couple of months.
At that time, the reproposal will be sent to the Office of Management and Budget, and then DOL will go into what she called “radio silence” about the reproposal.
The reproposal, Borzi said—which will come in a three-part package that includes the proposed regulation, the economic analysis and the prohibited transaction exemptions—is really one rule: “that you have to put the best interest of your client ahead of your own.”
Check out Bill Would Force DOL to Let SEC Fire First on Fiduciary on AdvisorOne.