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Two Other BD Issues Still Loom

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The independent broker-dealer community has consistently and loudly derided the Department of Labor’s on-again, off-again plan to redefine fiduciary under the Employee Retirement Income Security Act. In late October, Labor Secretary Thomas Perez said the department continues to “reach out to stakeholders” regarding the redraft of its rule so that DOL can “understand with granularity” what the “nature of the problem is and what the nature of various stakeholders’ concerns are” regarding the rulemaking.

When asked if DOL still plans to release in January the redraft of its rule to amend the definition of fiduciary under ERISA, Perez declined to answer specifically, referring only to the January redraft release date as cited in DOL’s regulatory agenda.

A second, related DOL move will probably affect broker-dealers as well: Labor is likely to hold broker-dealers who chase IRA rollovers to the same fiduciary standards that retirement advisors must meet. ERISA attorney Fred Reish said in late October that with an estimated $2 trillion in the 401(k) accounts of baby boomers at stake, regulators are “taking it all very seriously.”

Speaking at the Center for Due Diligence conference in San Antonio, Reish said broker-dealers should brace for tighter rules from the DOL, most likely as part of its wider effort to impose the fiduciary standard on more of the financial services world.

January or Later?

DOL had announced in late May that it would further delay release of the fiduciary redraft from August to January. The redraft, Perez told reporters in October, is “on our regulatory agenda and we continue to reach out and listen to various stakeholders […] and we continue to learn a lot from them.”

“We’re proceeding under the assumption that there will be a proposal,” Dale Brown, president and CEO of the Financial Services Institute, said during FSI’s second Annual Advisor Summit in Washington.

Phyllis Borzi, assistant secretary of Labor for the Employee Benefits Security Administration and the main architect of the DOL’s fiduciary rule, “is intent” on getting a fiduciary reproposal out, Brown told at the late September FSI summit.

Robert Lewis, FSI’s vice president of legislative affairs, noted at the summit that DOL’s redraft could come even later than January, adding that FSI is still “actively educating Congress” regarding FSI’s opposition to DOL’s fiduciary rulemaking and urged advisors to help.

—Melanie Waddell