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March 01, 2011 at 08:22 AM
Phyllis Borzi, assistant secretary for the Department of Labor’s (DOL) Employee Benefits Security Administration (EBSA) said Tuesday that the EBSA plans to “refine” the text of its proposed regulation amending the definition of fiduciary under the Employee Retirement Income Security Act (ERISA) and issue a final rule by year-end.
Borzi (left), speaking at EBSA’s public hearing on amending ‘fiduciary’ under ERISA, which was held at DOL’s headquarters in Washington, said that EBSA has been “working closely” with the Securities and Exchange Commission (SEC) as the EBSA develops its regulation, and that EBSA and the SEC’s goal is to “harmonize both [agencies’] statutes” regarding who is a fiduciary when giving investment advice.
But industry observers doubt that the SEC will issue a final fiduciary rule of its own by year end, even though SEC staff has penciled in the April-through-July time period to bring a proposed rule regarding fiduciary duty to the Commission. Don Trone, CEO of Strategic Ethos, says that the SEC and DOL “should be coordinating their efforts regarding fiduciary” duty, but since the Dodd-Frank Act does not require the two agencies to do so the “probability of ‘formal’ harmonization” of both agencies’ rules is unlikely.
However, Trone (left) says he foresees an “informal” harmonization of the agencies’ fiduciary rules which will outline “baseline professionalism” standards for a fiduciary as well as the fact that investment decisions should be made to a certain risk/return profile of the client. The informal harmonization will also likely state, Trone continues, that the investment strategy should be in writing; the investment strategy should be implemented by experts; fees and expenses should be controlled and accounted for; and the investment strategy has to be monitored on an ongoing basis.
Trone argues that EBSA is attempting to achieve two goals with its fiduciary revisions: to continue to address the requirements set out in the 2006 Pension Protection Act (PPA) to examine whether IRAs should be subject to the same fiduciary standard of care as a qualified retirement plan; and to examine whether other service providers, such as investment consultants, should be subject to a fiduciary standard of care.
