DOL Fiduciary Plan Hits Delay, Borzi Says

But in all fairness, Reish says further delay can be expected as Borzi and her team will be releasing a “package of rules that will include a number of proposed prohibited transaction exemptions.” Indeed, as Borzi reiterated at the FSI event, the package that will be sent to OMB will include “the text of the reg, the preamble, and a regulatory impact analysis.” Reish adds that while the regulation has attracted most of the attention, “the exemptions will determine the intensity of the upcoming fight on this politically charged issue.” If the exemptions “are fairly broad — for example, on advice for IRAs — the opposition from the private sector may be reduced.”

When asked by Brown if the reproposal would indeed include IRAs — which advisors have vigorously complained will cause them to lose their ability to earn commissions on IRA advice — Borzi asserted: “We will cover them.”

“What this multiyear process has shown us is that there’s an even greater need to protect those in IRAs…We are going to move forward on that.”

But Reish also voiced his disappointment with the delay. “It seems like we have been waiting for a long time,” he says. “It would be helpful to see the DOL’s proposal [because] right now, we are in a holding pattern on advising clients about how to plan for the future.” He conceded, however, that “it is important that the DOL take the time to get this [reproposal] right.”

Brad Campbell, former head of EBSA who’s now of counsel in Drinker Biddle & Reath’s Washington office, said that he welcomes the delay “given the importance of the issue.”

As the bipartisan congressional opposition to the original proposal that was released in 2010 demonstrates, Campbell says, “DOL has to make substantive changes if it intends to proceed,” and the Department “also needs to actually coordinate with, not just talk to, its counterparts at the SEC.”

Brown told ThinkAdvisor that FSI is “encouraged” that DOL’s “focus is on getting [the reproposal] right, and not getting it done quickly. Our concern is avoiding unintended consequences for small investors.”

Brown and Borzi’s nearly hourlong discussion did include some awkward moments. One notable one came when Brown asked Borzi if the revamped proposal would be “business-model neutral.”

Replied Borzi: “I find this question puzzling because ERISA doesn’t regulate business models, it regulates behavior. The issue is to attack the problem of conflicted advice. As long as the advisor giving this advice is insulated from conflicts of interest, we’re indifferent.”

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Check out September Surprise: Fiduciary Supporters Lobby the SEC on ThinkAdvisor.