Advisors Cheer Delay on Fiduciary Rule

Acknowledging opposition from industry and legislators, the Department of Labor’s Employee Benefits Security Administration has withdrawn and is re-proposing its rule redefining the term "fiduciary."

Seeking to ensure that potential conflicts-of-interest among broker-dealers would not compromise the quality of investment advice, the ESBA wanted to amend a 1975 regulation that defines when a person providing investment advice becomes a fiduciary under the Employee Retirement Income Security Act (ERISA). Industry associations protested that if the proposed rule was enacted advisors would lose their ability to be compensated through commissions on advice given to investors. In a letter to Labor Secretary Hilda Solis last week, House Financial Services Committee Ranking Member Barney Frank (D.-Mass.) asked the department to delay the rule and to better coordinate the rule-making with similar efforts underway at the Securities and Exchange Commission and the Commodities Futures Trading Commission.

"We have said all along that we will take the time to get this right to ensure that we provide the strongest possible protections to business owners and retirement savers in plans and IRAs," EBSA Assistant Secretary Phyllis Borzi said in a statement. "Investment advisers shouldn't be able to steer retirees, workers, small businesses and others into investments that benefit the advisors at the expense of their clients. The consumer's retirement security must come first."

The Financial Services Institute President and CEO Dale Brown expressed satisfaction that the rule had been withdrawn.

“We applaud the Department and Assistant Secretary Borzi for recognizing the correct course of action and taking steps to get the rule right for investors and financial advisors,” Brown said. “The rule, as proposed, would have serious negative consequences for Main Street Americans in need of retirement advice.”