SIFMA plans to step up opposition to DOL fiduciary-duty rule

Officials say group must do more to defeat regulation, which is due out in January

Nov 11, 2014 @ 12:39 pm

By Mark Schoeff Jr.

As the clock ticks toward the re-release of a proposed Labor Department regulation that would extend fiduciary responsibility to advisers selling individual retirement accounts, a securities industry trade group is stepping up its lobbying campaign against the regulation.

The regulation, which was introduced in 2010 but withdrawn after fierce industry resistance, was slated for re-proposal last May. Instead, the agency delayed it until January.

At the annual conference of the Securities Industry and Financial Markets Association Monday, former SIFMA chairman Jim Rosenthal said group members had generated 100,000 emails to Congress over six weeks this year in opposition to the DOL rule. The group also had meetings with 39 lawmakers.

But Mr. Rosenthal said the organization has to become more active. He noted that 92% of SIFMA's 537 member firms sat on the sidelines of the DOL opposition effort, fewer than 10% of member firms' 270,000 financial advisers sent emails to Congress and none of the firms' clients participated.

“Essentially, we mobilized thousands, when we have the potential to mobilize hundreds of thousands of employees and millions of clients,” Mr. Rosenthal, chief operating officer at Morgan Stanley, said in a speech at the SIFMA conference.

He urged SIFMA members to keep up the fight.


“It's not over,” he said of the DOL measure. “It's not surprising the proposal is alive and coming back for another round.”

SIFMA already is one of the top lobbyists, spending $5.8 million so far in 2014, according to the Center for Responsive Politics. Its message about the DOL rule may resonate more with the Republican-majority Senate that was elected last week than the current Democratic-led Senate, although the rule has produced bipartisan criticism.

Under the original DOL proposal, the definition of “fiduciary” would extend to more financial advisers who provide advice to retirement plans, including brokers who sell individual retirement accounts. The agency is promoting the rule as a way to protect investors from advisers with conflicts of interest.

In his SIFMA appearance, Mr. Rosenthal asserted that the rule would force IRAs to be held only in managed accounts that charge investors fees based on assets under management. It would curtail their being offered in brokerage accounts that charge investors on a transaction basis for trades. He said such an arrangement would prevent brokers from servicing small accounts.

DOL Assistant Secretary Phyllis Borzi, the rule's champion, has stated in many public appearances that the new rule will not prohibit commissions on IRAs and also would include other exemptions that would address other forms of compensation.

Labor Secretary Thomas Perez is meeting with business groups in advance of the DOL's January re-proposal.

Wall Street is girding itself for the revised rule by continuing to talk to lawmakers, said new SIFMA chairman Bill Johnstone, chairman and chief executive of D.A. Davidson Cos.

“We've been quite effective at the congressional level,” Mr. Johnstone said on the sidelines of the SIFMA conference. “We don't think the case has been made [in favor of the DOL rule]. It's costly. It limits investor choice. It has a particularly adverse effect on smaller investors.”


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