As federal regulators put the finishing touches on a broader definition of fiduciaries, legislators and lobbyists are increasing their efforts to send it back to the drawing board.
Phyllis C. Borzi, assistant secretary of labor for the Employee Benefits Security Administration, leads the charge of those supporting a new Department of Labor proposal defining a fiduciary, which she introduced October 2010. Her view: The proposal is simply a return to the original intent of the Employee Retirement Income Security Act of 1974, which was to ensure that investment advisers offered “undivided loyalty” to plans, Ms. Borzi said in an interview.
The proposal would define a fiduciary as a person who provides investment advice to plans for a fee or other compensation. The change from a five-part test was designed to foster impartiality of financial advice and “to better reflect relationships” between investment advisors and their clients, according to an EBSA fact sheet.
Opponents, however, say the current five-part test for fiduciary responsibility works, and the proposed extension of fiduciary responsibility hasn't been thought out, is based on faulty data and would have a chilling effect on investment advice and costs.
EBSA officials hope to have the proposal to the Office of Management and Budget for review by September and a final rule out by the end of this year.
Opponents of the proposal have received help from some on Capitol Hill, where legislators on both sides of the political aisle have written letters asking the DOL to delay or rewrite the rule.
In a May 18 letter to the DOL, SEC and CFTC, Democratic Sens. John Kerry of Massachusetts and Jeanne Shaheen of New Hampshire joined the call for a reproposal or at least clearer exemptions for investment advisers. The week before, 30 members of the New Democrat Coalition wrote to the same agencies, expressing concern that the new rule “would result in worse investment decisions” by consumers and increased costs.
Those calls followed an April letter from ranking Republican members of key House and Senate committees calling the proposal in its current form “unworkable” and asking that it be delayed or stopped.