Kent Mason, partner with Davis & Harman, speaking to the Employee Benefits Security Administration (EBSA) on behalf of the ABC, cautioned that “an overly broad definition would actually have a very adverse effect on retirement savings by raising costs and inhibiting investment education and guidance for plan participants.”  

Mason noted that “an ERISA fiduciary relationship is a very serious relationship with the highest fiduciary standard under the law. In that context, fiduciary status should not be triggered by casual discussions but only by serious communications that reflect a mutual understanding that an adviser/advisee relationship exists. In our view, a fiduciary relationship should not be treated as existing in any case unless there is a mutual understanding that the recommendations or advice being provided in connection with a plan will play a significant role in the recipient’s decision-making.”   

In considering who then should be designated as a plan’s fiduciary, Mason answered, “Common practice is for a plan sponsor to form a committee of senior executives to oversee plan issues, including plan investment issues. It is certainly clear that such committee has fiduciary status. But under the proposed regulations, large numbers of middle-level employees who frame issues and make recommendations for senior employees to consider would also be fiduciaries. The effects of too many fiduciaries with no decision-making ability would be severely negative to the plan and the related administrative costs would skyrocket.”  

Mason also suggested that if a one-time recommendation can give rise to fiduciary status, it is essential to distinguish between fiduciary recommendations and the selling of investment products or services. He said the Council applauds the Department for including an exemption for persons acting as, or on behalf of, purchasers or sellers, however, it is critical that the scope of this exemption be expanded and clarified.   

The Council said it was urging EBSA and the Securities and Exchange Commission to coordinate and articulate a single standard of conduct applicable to brokers and dealers in providing investment advice and for the Commodity Futures Trading Commission to bring its proposed standards for business conduct regarding swaps in alignment with those of the DoL.