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Group Worries About Proposed Advice Regs

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The SPARK Institute has voiced concern about provisions in proposed investment advice regulations that would define acceptable investment practices and theory.

The Employee Benefits Security Administration proposed the regulations March 2.

“We are concerned that EBSA’s statements regarding the use of historical performance data in connection with computer-based advice models will have unintended negative spillover consequences for retirement investment fiduciaries, plan sponsors and participants,” stated Larry H. Goldbrum, general counsel for SPARK, Simsbury, Conn., in a comment letter to EBSA. “The SPARK Institute believes that EBSA’s position intrudes on a plan fiduciary’s discretionary authority and ability to rely on an independent investment adviser’s professional judgment and recommendations regarding what criteria are appropriate and important for making decisions that are best for the plan and its participants.”

A result of the proposed rules would likely be to reduce availability of computer-based investment advice for plan participants, Goldbrum said.

Other concerns raised in the letter:

–Concepts in the proposed rules could impair educational and asset-allocation tools that plan sponsors and service providers make available to participants in a non-fiduciary capacity.

–Language in the proposed rules limits selection criteria to plans charging fees and expenses, suggesting a governmental bias in favor of passively managed or index funds over actively managed funds.

However, SPARK does commend EBSA in one area–for saying that neither the proposed rules nor the Pension Protection Act of 2006 exemption for investment advice affects EBSA’s prior guidance on providing investment advice.

SPARK’s comment letter is available here: http://www.sparkinstitute.org/comments-and-materials.php

EBSA’s proposed Investment Advice Rules are available here: http://www.dol.gov/federalregister/HtmlDisplay.aspx?DocId=23559&AgencyId=8&DocumentType=1

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