DOL proposal of fiduciary-duty rule delayed again

Advocates for standard take latest postponement in stride

May 28, 2014 @ 8:30 am

By Mark Schoeff Jr.

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Advocates for raising investment-advice standards are taking in stride the latest delay in a Department of Labor fiduciary-duty rule.

In an update to its regulatory calendar on Tuesday, the agency moved a re-proposal of the regulation from August to January 2015. First introduced in 2010 but withdrawn amid fierce financial industry criticism, the rule would more broadly define as fiduciaries investment advisers to employee retirement plans and individual retirement accounts.

The delay gives Labor Secretary Thomas Perez more time to fulfill a promise made during his confirmation hearing last year to meet with all interest groups trying to shape the rule, according to Barbara Roper, director of investor protection at the Consumer Federation of America.

It also gives the agency more breathing room to refine the proposal and conduct a cost-benefit analysis.

“It is more important to get the rule right than to get it done fast,” Ms. Roper said. “On the other hand, getting it done is important.”

Knut Rostad, president of the Institute for the Fiduciary Standard, said he expected the delay and sees it as an opportunity for proponents to hone their message.

“We all would benefit from some fresh thinking on how to frame and how to push this effort forward,” said Mr. Rostad, the regulatory and compliance officer at Rembert Pendleton Jackson.

The Department of Labor originally proposed the rule as a way to protect workers and retirees from conflicted investment advice, as they build their own retirement nest eggs through defined contribution plans.

The financial industry loudly protested, saying the rule would have curtailed commissions and put a crimp on revenue sharing, potentially driving brokers out of the retirement business and limiting advice options for investors with modest accounts.

The Securities Industry and Financial Markets Association welcomed the DOL delay but warned the agency not to re-propose its rule until after the Securities and Exchange Commission advances its own investment-advice rule. The SEC is considering imposing a uniform fiduciary-duty standard on retail investment advice, an option it was given by the Dodd-Frank financial reform law.

“From Day 1, this has been a troubled proposal by DOL that will harm the ability of everyday American investors and small business owners to save for retirement,” SIFMA president and chief executive Kenneth Bentsen Jr. said in a statement. “While this extended timeline provides a temporary delay, we believe that it is the responsibility of the SEC to act, under the authority provided to them by the Dodd-Frank Act. Premature actions by the DOL, whether now or in January, could undermine the SEC's work to improve upon the standard of conduct owed by broker-dealers and investment advisers to retail clients.”

One group that has expressed concerns about the rule, the Financial Services Institute, echoed Ms. Roper in its reaction to the DOL delay.

“Our main goal is that they get the rule right, not get it out fast,” FSI spokesman Chris Paulitz said in a statement. “We remain eager to be helpful to the department to ensure small investors can continue to have access to affordable, objective financial advice."

Partisans in the DOL fiduciary-duty debate have locked horns recently, with both sides issuing studies that purport to prove their points about the benefit and harm of the pending rule.

Ms. Roper is concerned that the delay will aid Wall Street's opposition.

“The longer we go with the rule not being out there, the easier it is for the [financial] industry to oppose it based on fiction rather than fact,” Ms. Roper said.

Between now and January, the White House also might jump into the fiduciary-duty debate.

“Getting the White House involved is a good thing in terms of sending the message that this rule proposal has support at the highest level,” Ms. Roper said.


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