SIFMA Believes DOL Revision To The Term “Fiduciary” Must Be Withdrawn, Reproposed

In testimony today before the House Education & Workforce Committee, SIFMA executive vice president for public policy and advocacy Ken Bentsen outlined SIFMA’s views on the Department of Labor’s proposal to redefine the term “fiduciary” under the Employee Retirement Income Security Act of 1974 (ERISA), effectively changing 35 years of established regulatory certainty. 

SIFMA believes the DOL revision must be withdrawn and re‐proposed and that necessary exemptions must be promulgated in advance of any final rule. SIFMA further believes there must be sufficient coordination with and consideration of the SEC’s likely action under Section 913. Otherwise, this proposal will have significant negative impact to millions of accountholders. 

In his testimony, Mr. Bentsen said, “However well intentioned, we believe the Department’s proposed regulation has far broader impact than the problems it seeks to address. This proposed rule would reverse 35 years of case law, enforcement policy and the understanding of plans and plan service providers as well as the manner in which products and services are provided to plans, plan participants and IRA account holders, without any legislative direction to move from the Department’s contemporaneous understanding of the statute, in order to make it easier for the Department to sue service providers. That seems to us to be an inadequate basis for proposing such a dramatic change. And of course, this enforcement rationale cannot apply to IRAs, over which the Department has no enforcement authority.” 

SIFMA also noted that DOL has not fully considered the costs of this proposal on small plans and IRAs and the manner in which their investment choices will be curtailed, or the costs on large plans that may be unable to engage in swaps, prime broker their assets, invest in alternatives, obtain futures execution and otherwise have their investment choices limited by the proposal. 

The full testimony is available at the following link:http://www.sifma.org/issues/item.aspx?id=8589934878