In the letter, Kenneth Margraf, Vice President at Liberty Capital, said making brokers and registered investment advisers (RIAs) fiduciaries to retirement account clients “adds nothing positive to the protection of clients.” Margraf contends that the new definition would take away from investment choices brokers would have in making asset recommendations to meet stated client objectives, and would discourage them from making any aggressive recommendations, even if appropriate, for fear of litigation.Margraf argues that the terms “fiduciary” and “prudent man rule” are very broad and subject to interpretation based on different situations. If the DoL is to hold the brokers and (registered investment advisers) RIAs to a fiduciary standard, additional clarification from FINRA (Financial Industry Regulatory Authority) would be necessary.
The U.S. Chamber of Commerce also feels more clarification will be needed. In its comments to the DoL, it asked for a 60-day extension of the comment period on the definition change to consider results of a study required by the Securities and Exchange Commission by the Dodd-Frank Act.
According to the Chamber’s letter, one day after the comment period ends for the DOL proposed rule, the SEC is required to complete a study on the standard of care under the securities laws for broker-dealers and investment advisers. The study is required pursuant to section 913 of the Dodd-Frank Act instructing the SEC to study the standard of care applicable to broker-dealers and to study the effects of extending the fiduciary standard of care applicable to investment advisers under the Investment Advisers Act of 1940 to broker-dealers.
“We anticipate that this study will significantly overlap with issues contained in the DOL’s proposed rule,” the Chamber said.Comments received by the DoL’s Employee Benefits Security Administration can be viewed at http://www.dol.gov/ebsa/regs/cmt-1210-AB32.html.