DOL: Back to square one on 'fiduciary'

The Labor Department today announced on Monday that it will withdraw and re-propose a rule that could expand the definition of a fiduciary under federal retirement law. The agency had argued that its fiduciary-duty regulation would help protect workers and retirees who now must provide their own nest egg through 401(k) plans and other self-directed retirement vehicles. But the proposal had drawn withering criticism from a wide range of financial industry groups and bipartisan members of Congress, who asserted that it would subject advisers to individual retirement accounts to fiduciary duty for the first time and curtail commissions, while driving up regulatory and liability costs. “We have said all along that we will take the time to get this right to ensure that we provide the strongest possible protections to business owners and retirement savers in plans and IRAs,” Phyllis C. Borzi, assistant secretary of labor for the Employee Benefits Security Administration, said in a statement. “Investment advisers shouldn't be able to steer retirees, workers, small businesses and others into investments that benefit the advisers at the expense of their clients. The consumer's retirement security must come first.” The agency said that its decision to re-propose the rule stemmed from requests by members of Congress and the public to have more time to provide input. The rejiggered proposal won't be unveiled until 2012. The revised rule is likely to have “exemptions addressing concerns about the impact of the new regulation on the current fee practices of brokers and advisers,” the Labor Department said in a statement. In addition, the revamped rule will clarify the continued applicability of exemptions that allow brokers to receive commissions for advising clients on which mutual funds, stocks and insurance products to purchase. Industry groups gave a sigh of relief. “Since the beginning, we have raised significant concerns about the proposal and lack of cost-benefit analysis on a rule that would affect millions of IRA holders and plan participants,” Ken Bentsen, executive vice president of public policy and advocacy at the Securities Industry and Financial Markets Association, said in a statement. “We appreciate the department's announcement that they indeed will conduct further economic analysis and make changes that will be included in the new proposed rule.” “Right now, our economy needs more Americans saving for retirement, not plans that reduce those options to save,” said Dale Brown, chief executive of the Financial Services Institute Inc. “This is the right decision for millions of American retirement plan holders and the qualified professionals who help them.” Meanwhile, in a related story, an SEC official confirmed to InvestmentNewsthat the agency's timetable for promulgating a universal standard of care for advisers and broker-dealers is getting pushed back. The cause? The expanded cost-benefit analysis demanded by members of Congress.