Senators Seek DOL Rule Delay to Mitigate Potential Conflict in Rules on Investment Advice

A delay in a new rule proposal by the Department of Labor (DOL) regarding investment advice for retirement plans is being pursued by a group of Democratic Senators, who argue that the proposed rule may clash with a prospective proposal by the Securities and Exchange Commission (SEC) on similar investment advice issues. The DOL proposal details rules for investment advice for retirement plans, while the SEC is currently considering their own proposal for higher standards for investment advice given by brokers to investors. The parallel nature of these two rules to one another, the ten Senators in the group argue, would likely create conflicts within the regulations, leading to brokers and advisers attempting to abide by two separate standards for advice.

The DOL proposed rule that is slated for release in October 2013 was originally proposed in 2010 and aims to “expand the definition of ‘fiduciary’ for anyone providing investment advice for retirement plans”. The 2010 proposal was viewed by the DOL as a smart move towards helping to regulate retirement advice provided to individual 401k and individual retirement account (IRA) holders. Many in the financial industry and in Congress, however, contended at the time that the rule would place brokers who sell IRAs under the new “fiduciary” definition range, “threatening commissions and access to brokers for millions of IRA holders.” While proponents of the DOL proposal argue that the delay “is meant to kill” the rule, the re-introduction of this proposal in October comes at a time where the SEC is weighing the introduction of its own proposed rule on broker investment advice standards. Avoiding “uncoordinated efforts” on investment advice regulation, no matter what position one takes on these rulings, may nevertheless prevent future missteps by brokers and advisers in their interactions with current and future investors.

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