DOL's Borzi Fights Critics of Proposed Fiduciary Rule

But Borzi said Tuesday that ERISA created IRAs. Borzi went on to say that there has been a “seismic shift” of boomers’ money from 401(k)s to IRAs, and that “the level of protection in the IRA marketplace for people against financial conflicts of interest is of concern.” This lack of protection, she said, “is one of the main reasons” EBSA has included IRAs in its fiduciary rule proposal.

Borzi said she is “mystified” by critics who say if the proposed rule were finalized in its current form brokers would be forced out of the IRA marketplace “because they couldn’t get commissions.” Since the mid-1980s, she said, the EBSA has had class exemptions for brokers receiving commissions on such “run of the mill” products as securities, annuities and bank products—but not for hedge funds or private equity. “We are carefully examining the exemptions and if we need to tweak them, we’re going to do it,” Borzi said.

Despite disparaging comments that EBSA is working "in a vacuum" and has been “paying no attention” to what’s been going on at the SEC, “let me assure you that we have been working” to ensure harmonization of both agencies’ rules. However, the SEC follows securities laws and will be assessing putting brokers under the same fiduciary mandate as advisors, while the EBSA has a statutory structure under ERISA that defines fiduciary, so “it’s highly unlikely that our rules would be identical, and Dodd-Frank doesn’t say they have to be,” she explained.

But Borzi said she could “promise” this: “that the rules will be harmonized so that compliance with one of the other laws [besides EBSA’s] will not cause a problem for you under ERISA.”