WASHINGTON BUREAU — The U.S. Securities and Exchange Commission (SEC) is helping the U.S. Department of Labor update a definition of "fiduciary," but that effort is separate from the SEC's own fiduciary standard study, SEC Chairman Mary Schapiro said today.
Schapiro was testifying at at a House Financial Services Committee hearing.
The Dodd-Frank Consumer Protection and Wall Street Reform Act of 2010 requires the SEC to conduct a study on the scope of the fiduciary standard in investment product sales.
Traditionally, investment advisors have used a fiduciary standard, which requires them to put customers' interests ahead of their own. Insurance agents who sell products such as variable annuities have traditionally used a suitability standard, which requires that they verify that a product sold to a consumer suits the consumer's needs.
The Labor Department has been working on an update of the definition of fiduciary that it applies to retirement plan advisors when enforcing the Employee Retirement Income Security Act (ERISA).
In response to a question, Schapiro said the SEC's fiduciary standard project has no connection with the Labor Department retirement plan fiduciary definition project.
"We were very clear that SEC's fiduciary study does not deal with fiduciary under ERISA," Schapiro told lawmakers.
The Labor Department fiduciary definition expansion proposal would mostly affect broker-dealers working with clients who have individual retirement accounts, Schapiro said.
"We have offered to provide information and will reach out to provide help," Schapiro said.
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