Fiduciary Policy Should Not “Impede” Common Interactions

Paul Stevens, president of the Investment Company Institute (ICI), presented his organization’s statement to the Department of Labor (DoL).  

Stevens said it is important for the DoL and the Employee Benefits Security Administration (EBSA) to consider the weight of having fiduciary status–“Fiduciary status entails one of the highest obligations, and also liabilities, known to the law. Fiduciary status underpins the entire ERISA compliance structure. Thus, rules governing who is a fiduciary need to provide clarity. They should not impede commonplace financial interactions. They must allow plans and retirement savers to obtain investments that meet their needs and gather a range of market input into their decision making process.”

The ICI recommended the following revisions to the proposed rule:

  • Persons who deal with plans or IRA investors must know whether or not they are fiduciaries.
  • Fiduciary status should attach only to genuine advisory relationships where a position of trust and confidence exists.
  • Simply selling an investment product cannot be a fiduciary act. And,
  • The rule should not discourage the assistance that recordkeepers engaged to administer plan accounts provide to help fiduciaries prudently select and monitor plan menu investments.

It also suggested the following clarifications for the sales-exception provisions:

  • The exception is available to a broad range of sellers and agents. For example it should be available when a mutual fund is sold directly by the fund company or its affiliated distributor and when a fund is sold through a broker/dealer.
  • The exception should not require that a seller characterize itself as “adverse.” The sale of a mutual fund is not a zero-sum game where one side benefits only at the expense of the other side.

The complete statement can be seen here.