The Department of Labor, facing intense opposition to a new definition of “fiduciary,” on Monday announced it will go back to the drawing board with a new proposal not expected until 2012.
“Everybody has asked us to look more deeply at the costs and benefits of the proposal. And that's what we're going to do,” Phyllis C. Borzi, assistant secretary of labor and head of the Employee Benefits Security Administration, announced in a conference call with reporters.
Ms. Borzi said that congressional pressure to redo the rule in light of vocal industry opposition “was certainly a factor, but we wouldn't have reproposed it if we didn't think it was the right thing to do. This is such an important consumer protection rule. We think this extra time will enable us to strengthen the rule.”
The new rule will have more specific exemptions, including clarifying that fiduciary advice is limited to individual advice, not routine appraisals. EBSA also expects to offer exemptions to protect the current fee practices for brokers and advisers and specific investment recommendations.
Ms. Borzi said the goal of any fiduciary proposal is to protect plan participants and IRA owners from abusive practices and conflicting advice from service providers. “We want to make sure that the investment advice they provide to their clients is unbiased and solely in the interests of the clients,” she said.
The EBSA will work closely with other regulators to avoid potential compliance conflicts, Ms. Borzi added.
Monday's announcement “should address most of the concerns of critics on the Hill,” says Edward Ferrigno, vice president for Washington affairs for the Profit Sharing/401k Council of America. “I think it's a positive step forward.”