May 28 The U.S. Department of Labor will, once
again, delay plans to unveil a revised proposal for a rule aimed
at beefing up standards of conduct for brokers who advise on
retirement plans and individual retirement accounts, according
to its agenda.
The Labor Department, which has jurisdiction over retirement
plans, including IRAs, will repropose its controversial rule in
January, 2015, instead of in August 2014, it said in a notice on
It is the most recent delay in a long-running struggle that
pits the department against various industry groups.
The plan would require advisers to retirement plans and IRAs
to act as fiduciaries, or in their clients' best interests.
The department is concerned that advisers may be swayed to
recommend securities, such as certain mutual funds, because of
special compensation their brokerages receive for promoting
them. Those recommendations could be costly to investors, the
department has said.
In 2012, the Labor Department withdrew an initial rule it
had proposed in 2010 after industry groups and lawmakers
expressed concerns about costs of the rule to the industry.
There are also questions about whether the rule would clash with
a separate fiduciary proposal under discussion at the U.S.
Securities and Exchange Commision.
Investor advocates have been pushing the SEC to require
brokers to act as fiduciaries, or in their clients' best
interests, when giving advice to their customers. Investment
advisers, a different type of financial adviser, must already
act as fiduciaries. Brokers must now give advice that is
"suitable," based on factors such as a client's risk tolerance
or age. But "suitable" investments are not always the "best" or
most cost-effective for the investor, consumer advocates say.
The securities industry has said it supports a fiduciary
standard for both brokers and investment advisers. But the
industry wants a new fiduciary standard that would streamline
regulations for both types of advisers and allow it to maintain
certain business practices, such as selling funds that are
branded with a brokerage's name.
Some legislators and the securities industry have called for
the Labor Department and SEC to coordinate the plans they are
developing. [ID: nL1N0IJ2DO] That would avoid problems such as
regulations that contradict.
"Premature actions by the (Labor Department), whether now or
in January, could undermine the SEC's work to improve upon the
standard of conduct owed by broker-dealers and investment
advisers to retail clients," said Kenneth Bentsen, Jr.,
president and chief executive of the Securities Industry and
Financial Markets Association, in a statement late on Tuesday.
A Labor Department spokesman did not immediately respond to
requests for comment about the reason for the delay.
A U.S. Department of Labor official spoke publicly about the
revised plan in March, saying it will both minimize conflicts
and still permit brokers to earn a living.
(Reporting by Suzanne Barlyn; Editing by Sofina Mirza-Reid)