Washington, D.C., January 2, 2024 – Today, SIFMA and SIFMA AMG submitted a comment letter to the Department of Labor (“the Department”) regarding the Notice of Proposed Rulemaking, “Retirement Security Rule: Definition of an Investment Advice Fiduciary,” and related proposed prohibited transaction exemption amendments, expressing strong concern with the proposal and the resulting negative impacts on retirement savers.

“SIFMA has wide-ranging and severe concerns with the approach taken by the Department of Labor in this package of proposed rules,” today’s letter stated. “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 letter urges the Department to withdraw its proposal while detailing several areas of concern: 1) the proposal goes well beyond any stated goal of the Department, 2) the required cost analysis is incomplete and flawed, and 3) the scope of this proposal 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.

“The Department has provided no competent 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 professional looking out for their best interest.”

The letter raised, among others, the following issues:

• The proposed regulation redefining the term” fiduciary” is overbroad and the accompanying proposed amendments to existing exemptions too narrow.
• The new definition of investment advice fiduciary is inconsistent with the common law definition of fiduciary and is inconsistent with the holding of the Fifth Circuit Court of Appeals Decision in Chamber of Commerce.
• The Department has not adequately shown why the proposed regulatory and exemptive package is needed and the cost analysis is flawed.
• Small businesses and individuals will lose valuable options, while institutional clients will lose valuable market information.

The letter also addressed the Department’s proposed fiduciary package related to PTE 2020-02, noting that given it was not fully effective until early 2022, there is no data to support whether the exemption is working as intended, and whether it is appropriately cost effective and protective and therefore is too early to consider changes.

“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,” continued the letter. “Premature amendment is in no one’s interest.  Regarding the Department’s proposed amendments to a variety of long-standing class exemptions that it has granted under ERISA, the letter urged the DOL not to finalize these amendments which are overly restrictive, unhelpful, and unnecessary.

The comment letter further expands on these views and can be found here.

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SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets. On behalf of our industry’s one million employees, we advocate on legislation, regulation and business policy affecting retail and institutional investors, equity and fixed income markets and related products and services. We serve as an industry coordinating body to promote fair and orderly markets, informed regulatory compliance, and efficient market operations and resiliency. We also provide a forum for industry policy and professional development.  SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the Global Financial Markets Association (GFMA).