SIFMA Asks DoL to Reconsider Fiduciary Definition Change

February 3, 2011 ( - The Securities Industry and Financial Markets Association (SIFMA) has asked the Department of Labor (DoL) to reconsider its proposed rule that would redefine the term “fiduciary” under the Employee Retirement Income Security Act (ERISA).

In its letter to the DoL, SIFMA noted that the proposal could critically impact the ability of individuals to reach a successful retirement, because the financial institutions most able to efficiently deliver investment assistance will no longer be able to do so without added cost to the plan participant or IRA account holder. If the agency will not reconsider its proposed rule, SIFMA requested that it carve out IRAs at this time to determine whether the unique costs and structure of IRAs would support a different fiduciary standard.   

SIFMA noted that the proposal comes at a time where both the Financial Industry Regulatory Authority (FINRA) and the Securities and Exchange Commission (SEC) are currently considering regulations implementing a fiduciary standard for brokers and investment advisers.  SIFMA requested that the DoL work more closely with FINRA and the SEC to ensure a coordinated rulemaking process leads to a workable standard across business models and products.    

“In the midst of other regulatory initiatives in this area, we ask the Department to reconsider this proposal and work with other regulators to ensure regulatory consistency,” said Tim Ryan, president and CEO of SIFMA, in the letter.  

SIFMA contended that the DoL has not fully considered the costs of this proposal on small plans and IRAs and the manner in which their investment choices will be curtailed, or the costs on large plans that may be unable to engage in swaps, prime broker their assets, invest in alternatives, obtain futures execution and otherwise have their investment choices limited by the proposal.  The disruption to the capital markets has also not been explored: the additional costs of principal transactions, the restriction on the use of trading platforms and other venues which improve liquidity and market efficiency, the artificial barriers on investments in private equity and real estate.   

A copy of the letter can be found at