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More Professionals May Be Subject to Fiduciary

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On March 1, the Department of Labor (DOL) will hold public hearings on its proposed amendments to the term “fiduciary.” The Securities Industry Financial Markets Association (SIFMA) has asked the DOL to work more closely with the Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC) to make sure that a coordinated rulemaking process regarding fiduciary duty “leads to a workable standard across business models and products.”

SIFMA urged DOL in a recent comment letter to reconsider its proposed rule, which SIFMA said would redefine the term fiduciary, “effectively changing 35 years of established regulatory certainty.”

But Don Trone, CEO of Strategic Ethos, says that SIFMA is mistaken in saying that the DOL is looking to erase 35 years of fiduciary history. Instead, he said the DOL is looking to “build upon its bedrock fiduciary foundation, not change it.” The DOL, Trone says, is attempting to achieve two goals with its fiduciary revisions: to continue to address the requirements set out in the 2006 Pension Protection Act 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.

In both cases, according to Trone, the DOL is looking to subject more persons to a fiduciary standard of care. “There have been investment consultants who have taken the position that they are not a fiduciary to a plan because they do not have discretion over investment decisions or plan assets. The DOL wants to close this loophole and make it clear that all persons who advise plans on investment product or strategy will be subject to a fiduciary standard.”

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