The Securities Industry and Financial Markets Association (SIFMA), and the SIFMA Asset Management Group (AMG) voiced their concerns over the Department of Labor’s proposed rule regarding investment advice fiduciaries.
The proposed rule, called Retirement Security Rule: Definition of an Investment Advice Fiduciary, defines what a fiduciary is and outlines its roles and responsibilities.
In a letter to DOL officials, SIFMA urges the Labor Department to withdraw its proposal, citing several areas of concern. Among them, SIFMA officials say the proposal goes beyond any stated goal of the department and the definition of a fiduciary is overly broad. Also, they say the required cost analysis is incomplete and flawed. In addition, SIFMA says the scope is inconsistent with the decision of the Fifth Circuit Court of Appeals in Chamber of Commerce of United States of America v. United States Department of Labor.
They add that the proposal will have a negative impact on retirement savers. In addition, small businesses and individuals will lose valuable options, while institutional clients will lose valuable market information.
“SIFMA has wide-ranging and severe concerns with the approach taken by the Department of Labor in this package of proposed rules,” the letter said. “The proposal is overly broad, unnecessary, and inconsistent with existing federal regulations such as the SEC’s Regulation Best Interest. Most importantly, it would negatively impact Americans saving for retirement by limiting access to advice and education while also limiting investor choice in advisors. For all of these reasons and more, the Department should withdraw this rulemaking package.”
The organizations add that the department has provided no good evidence that the proposal is necessary.
“We have spent the past thirteen years working with regulators to improve the standard of care that individual investors receive,” the letter continued. “Since the Department first undertook this project, we now have the SEC’s Regulation Best Interest, the Department’s PTE 2020-02, and the NAIC’s best interest standard. Our member firms have made substantial changes to implement Regulation Best Interest, and many firms have instituted further changes to their practices to comply with PTE 2020-02. Flexibility in practices and firm arrangements provide individual investors with substantial choice in the marketplace, while still getting the benefit of financial professionals looking out for their best interest.”
SIFMA adds that while the proposed regulation redefining the term” fiduciary” is overbroad, the accompanying proposed amendments to existing exemptions are too narrow.
“With no data to support these amendments, we believe they are premature and based only on speculation and a change in the Administration. The cost of change to the industry, and then in turn to retirement investors is enormous,” the letter continued.
It concluded by asking DOL not to finalize the rule.