Secretary of Labor Thomas Perez and Director of the National Economic Council and Assistant to the President for Economic Policy Jeff Zients yesterday in a press conference announced the long-awaited proposed regulation that redefines who a fiduciary is.
Lest there be any mistake what the intentions of the Administration are, the headline of the Fact Sheet that accompanied the proposed rule was:
Department of Labor Proposes Rule to Address Conflicts of Interest in Retirement Advice, Saving Middle-Class Families Billions of Dollars Every Year
Politics aside, the 120-page proposed rule expands the number of persons who are subject to fiduciary standards when they provide retirement investment advice. This would include anyone who provides investment advice or recommendations to an employee benefit plan, plan fiduciary, plan participant or beneficiary, or IRA.
However, the proposed rule also includes a new best interest contract exemption that would allow advisers to receive compensation that would otherwise be conflicts of interest if the conditions of the exemption are met.
What follows now is a 75-day notice and comment period during which individuals and groups who the Department of Labor refers to as stakeholders can provide comments on the proposed rule. The Department of Labor then reviews the comments and issues a final rule with a subsequent effective date.
More to come
And one more thing. The new conflict of interest environment doesnt stop here. Out on the regulatory horizon are two other rules that would require more disclosure on the part of advisers.
First, the Securities and Exchange Commission will be developing fiduciary standards on the sale of investment products.
Second, the North American Securities Administrators Association, (NASAA) whose members are states securities regulators, will be issuing a model fee disclosure chart later this year.
Kalish, a member of the EBA Advisory Board, is president of National Benefit Services, Inc., a Chicago-based consulting and administration firm. He provides continuing education to CPAs, attorneys and the financial service industry. Jerry has also been a guest lecturer at John Marshall Law School L.L.M. in Employee Benefits.
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