No. 2 at EBSA moves to lead stable value at Prudential

Experts see shift as hint that insurer may be prepping for reg changes

Nov 18, 2012 @ 12:01 am

By Darla Mercado

+ Zoom

Michael L. Davis, second-in-command at the Labor Department's Employee Benefits Security Administration, has become the head of Prudential Financial Inc.'s stable-value business — sparking chatter that the insurer is gearing up for potential regulatory developments.

Mr. Davis started his new job Nov. 12. Based in Woodbridge, N.J., the insurer's hub for stable-value operations, he reports to Jamie Kalamarides, senior vice president and head of Prudential Retirement's institutional investment solutions.

In a statement, Mr. Kalamarides cited Mr. Davis' “strong experience in the financial services industry and regulatory environment” as keys to helping the firm expand the stable-value business.

"TWO WAYS FOR THIS TO GO'

But retirement industry insiders speculated that Mr. Davis' hiring indicates that Prudential is preparing for stable value to become a focal point of the Labor Department's retirement policy.

Marcia Wagner, managing director at The Wagner Law Group, wondered whether Mr. Davis believed that the department could be convinced that stable-value funds could be a qualified default investment alternative for retirement plans.

“There are two ways for this to go: It could be better for stable value and end up back on the QDIA shortlist,” Ms. Wagner said. “Or it could get worse. Stable value will be more regulated and more scrutinized. It could be either one; it's unclear.”

Jason C. Roberts, chief executive of the Pension Resource Institute LLC, said that there has been buzz among service providers that the Labor Department could turn its attention toward advisers and plan sponsors' due diligence in selecting stable value.

"BRING INSIGHT'

Mr. Davis' expertise may contribute to what Prudential can do to educate distributors as well as plan sponsors.

“How do you get the plan sponsor comfortable in terms of documentation, prudent review and selection of the product?” Mr. Roberts said. Mr. Davis “can bring insight to both sides and facilitate adoption from the distribution's perspective, and he can also help through communication with the plan sponsor,” he said.

Dawn Kelly, spokeswoman at Prudential, declined to comment on the speculation; DOL spokesman Jason Surbey also declined to comment.

Experts agree that bringing Mr. Davis on board was a major coup for Prudential.

An alumnus of J.P. Morgan Asset Management, Mr. Davis was seen as understanding the needs of service providers as the DOL produced a volley of disclosure regulations and proposed a rule redefining “fiduciary.”

He “was always a very pragmatic regulator in terms of being accessible to the service provider community and receptive to comments,” Mr. Roberts said. “He wasn't going to tell you what you wanted to hear, but he would listen.”

“He was a regulator; he knows how the EBSA thinks,” Ms. Wagner said.

dmercado@investmentnews.com Twitter: @darla_mercado

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