The Department of Labor is killing a regulation issued in the last days of the Bush administration that would have allowed advisers affiliated with mutual funds, brokerage firms and other companies that sell investments to provide investment advice to 401(k) participants.
“We believe the final investment advice regulation published in the Jan. 21 Federal Register went too far in permitting investment advice arrangements not specifically contemplated by the statutory exemption,” said Phyllis C. Borzi, assistant secretary of the Employee Benefits Security Administration, a unit of the Labor Department.
Ms. Borzi, made the announcement today at a conference in Washington sponsored by the American Society of Pension Professionals & Actuaries.
"Today's workers will benefit from quality investment advice — advice that is both affordable and unbiased,” she said, adding that the Labor Department will now take a fresh look at regulations that govern investment advice and issue new rules.
The Obama administration and House Education and Labor Committee Chairman George Miller, D-Calif., had objected to the rules issued by the Bush administration on the grounds they would allow advisers who have a conflict of interest to provide advice.
Because of its opposition, the Obama administration had delayed the effective date of the Bush rules. It is not known when the administration will propose new rules.
The Pension Protection Act of 2006 included a provision aimed at making it easier for investment advisers to provide advice to 401(k) participants as long as fees earned by advisers are no different for investment options that are recommended, and as long as disclosures are provided.
The mutual fund industry has fought for allowing advisers affiliated with fund companies to give advice, arguing that the provision would make advice more accessible for 401(k) account holders. Many investment advisers opposed the Bush rule, arguing that fund companies and brokerage firms could exert pressure on advisers to recommend proprietary products.
Sara Hansard is a reporter at InvestmentNews, a sister publication of Pensions & Investments