Time & Attendance
By Mark Jr.
Jan. 6, 2012
Securities industry interest groups will have to scramble over the next few weeks to meet a request from the Labor Department, which wants details about firms’ individual retirement account business that the agency said will be used to formulate an expansion of the definition of “fiduciary” for retirement plan advisers.
In a letter dated Dec. 15, Joseph Piacentini, director of the DOL’s Office of Policy and Research, said that the department is seeking the information to conduct an “expanded regulatory impact analysis” that would determine the effect of a new rule on the IRA market.
The agency is seeking a wide array of information, including the rate of return, dividend payments and gains for each account, its investment strategy, compensation arrangements, recommendations that advisers made about the accounts, along with the account holder’s risk appetite and financial literacy.
The information is due by Jan. 15, according to the letter, which was first reported by Reuters. The scope of the request makes it hard to fulfill in a short period of time, according to financial industry interest groups. The process of compiling the information may slow down the Labor fiduciary rule.
The Department was not immediately available to comment on whether the request will delay the proposal.
Meanwhile, the Securities and Exchange Commission has not set a date for promulgating a rule that would impose a universal fiduciary duty on anyone offering retail investment advice.
In its latest timetable for implementing the Dodd-Frank financial reform law, the commission put fiduciary duty on the list of rules labeled “dates still to be determined.” Many other rules are designated for release during specific time periods.
Whether the Labor Department fiduciary rule is finalized this year may depend in part on its cost-benefit analysis.
The DOL’s Employee Benefits Security Administration “is particularly interested in data that will help to more rigorously and definitively determine what impact, if any, conflicts of interest faced by brokers or other [sic] who advise IRAs have on IRA investors,” Piacentini wrote in the Dec. 15 letter.
The letter was sent to groups such as the Financial Services Institute, the Investment Company Institute and the Securities Industry and Financial Markets Association.
Last year, Labor proposed revamping fiduciary duty rules for advisers to retirement plans that it had hoped to finalize by December. But it withdrew the rule in September—and promised to re-propose it early this year—after a firestorm of criticism from a broad array of industry participants, who asserted that it was too expansive.
They argued that the rule would apply the fiduciary standard to IRAs for the first time, curtailing commissions and driving brokers out of the IRA market. The DOL maintained that federal retirement law had to be updated with the fiduciary-duty expansion to better protect workers and retirees who now must manage their own nest eggs through IRAs and 401(k)s.
Opponents of the original proposal said that it lacked a sufficient cost-benefit analysis. It’s not clear how long it will take to compile a new analysis or when the re-proposed rule will come out. Representatives of the Labor Department were not immediately available for comment.
Financial industry associations were caught off guard by the letter, which they received while many of their staff members were on holiday vacation. Now those staffers have a challenging New Year assignment.
“We are working diligently to fulfill a request that came in the middle of the holidays with a very tight deadline,” FSI spokesman Chris Paulitz wrote in an e-mail. “We will deliver everything we can to the department in our constant effort to be a good resource for the administration.”
While the DOL rule on duties for retirement plan advisers await a cost-benefit analysis, fiduciary-duty advocates are concerned that the universal fiduciary rule before the SEC may fall by the wayside. But an SEC spokesman said the “to be determined” list is not the equivalent of a death watch.
“The planning schedule reflects the staff’s best estimates at present,” SEC spokesman John Nester wrote in an e-mail. “Items that currently fall under ‘dates to be determined’ are not excluded from consideration this year.”
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