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September 19, 2011 at 09:09 AM
Bowing to pressure from members of Congress, industry groups, and the public, the Department of Labor’s Employee Benefits Security Administration (EBSA) said Monday it would repropose its controversial rule amending the definition of fiduciary under the Employee Retirement Income Security Act (ERISA).
In announcing the decision, Phyllis Borzi (left), assistant secretary of EBSA, said the group has “said all along that we will take the time to get this right to ensure that we provide the strongest possible protections to business owners and retirement savers in plans and IRAs.” Investment advisors, she continued, “shouldn’t be able to steer retirees, workers, small businesses and others into investments that benefit the advisers at the expense of their clients. The consumer’s retirement security must come first.”
The decision to repropose, Borzi added, means that this important consumer protection initiative will benefit from additional input, review and consideration. “The agency agrees with stakeholders and lawmakers that more public input and greater research will strengthen the rule,” she said. The extended input will supplement more than 260 written public comments already received, as well as two days of open hearings and more than three dozen individual meetings with interested parties held by the agency.
The new proposed rule is expected to be issued in early 2012.
Consistent with the President Barack Obama’s January executive order on regulation, “the extended rulemaking process also will ensure that the public receives a full opportunity to review the agency’s updated economic analysis and revisions of the rule,” Borzi stated. EBSA, she pledged, will continue to coordinate closely with the Securities and Exchange Commission and the Commodities Futures Trading Commission (CFTC) to ensure that this effort is harmonized with other ongoing rulemaking.
Borzi then offered details on areas of the rule that will likely be revised. EBSA, she said, anticipates revising provisions of the rule including, but not restricted to, clarifying that “fiduciary advice is limited to individualized advice directed to specific parties, responding to concerns about the application of the regulation to routine appraisals and clarifying the limits of the rule’s application to arm’s length commercial transactions, such as swap transactions.”
Also anticipated are exemptions addressing concerns about the impact of the new regulation on the current fee practices of brokers and advisors, Borzi said, and “clarifying the continued applicability of exemptions that have long been in existence that allow brokers to receive commissions in connection with mutual funds, stocks and insurance products.” EBSA, she continued, “will carefully craft new or amended exemptions that can best preserve beneficial fee practices, while at the same time protecting plan participants and individual retirement account owners from abusive practices and conflicted advice.”
