The Asset Management Group (the “AMG”) of SIFMA appreciates the opportunity to provide the U.S. Department of Labor’s (“Department”) Employee Benefits Security Administration with comments on (1) the Proposed Definition of the Term ‘‘Fiduciary’’ (the “Proposed Rule”) and (2) the Proposed Best Interest Contract Exemption (the “Proposed BIC Exemption”).

The AMG’s members are already fiduciaries under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) when they act as discretionary investment managers or provide investment advice for clients that are employee benefit plans subject to ERISA, individual retirement accounts (“IRAs”) and other plans subject to the Internal Revenue Code of 1986, as amended (the “Code”), and their participants and beneficiaries, as well as entities that may be deemed to constitute “plan assets” by reason of 29 CFR 2510.3-101 as amended by Section 3(42) of ERISA or otherwise (all such “employee benefit plans,” “plans” and other entities deemed to constitute “plan assets” being referred to collectively as “Plans”).

The Proposed Rule will harm investors by hampering the ability of asset managers from acting in the best interest of Plan clients. The proposal will restrict asset managers’ ability to provide information and make the products and services they provide, and those that are provided to them, less available and more expensive. Also, asset managers and investors, already deemed sophisticated, will be burdened by standards designed for retail retirement savers.

Further, asset managers, in their separate role of creating and managing funds and investment products purchased by Plans, may not be able to offer a variety of products given the limiting effect of the proposed rule and the BIC Exemption. 

As a result, plan performance may suffer, as asset managers and their offered products become restricted by the proposed rule and the BIC Exemption.

The AMG shares the Department’s concern that Americans are not saving enough for retirement as well as its goal of ensuring that Plans receive the advice and assistance they need for optimal retirement benefits. The AMG also supports a “best interest” standard for financial professionals that would apply across all investment recommendations made to investors. However, the AMG believes that the Department’s objectives and a best interest standard should be achieved by the appropriate regulatory authorities through means that allow fiduciaries to operate effectively and preserve investor choice. While we respectfully believe that the means chosen by the Department are not within its power under ERISA, we have set forth in our comment letter recommendations on how the Proposed Rule and the Proposed BIC Exemption should be revised to allow asset managers to act in the best interest of their clients and maximize returns for retirement savers.

See Also:

United States Department of Labor: Conflict of Interest Proposed Rule

See Also:

• Executive Summary
• The Fiduciary Rule Itself
• Best Interest Contract Exemption (BIC exemption)
• Principal Transactions
• Prohibited Transaction Class Exemption (“PTCE”) 86-128
• Prohibited Transaction Class Exemption (“PTCE”) 84-24
• Prohibited Transaction Class Exemption (“PTCE”) 75-1, Part V
• Additional Exemptions
• NERA Analysis: Comment on the Department of Labor Proposal and Regulatory Impact Analysis
• Deloitte Report on the Anticipated Operational Impacts to Broker-Dealers of the Department of Labor’s Proposed Conflicts of Interest Rule Package