Department of Labor Proposed Rules
The U.S. Department of Labor has proposed a set of contentious rules aimed at expanding the fiduciary standard for retirement advisers. The rules have been sent to the White House for approval, following protests from both lawmakers and securities industry groups.
The Office of Management and Budget has confirmed receipt of the proposed rules, which have faced extreme opposition from Congress and industry groups that want to wait until the SEC revises its fiduciary standard.
The proposal would expand the rule already in place for certain investment advisers under the Employee Retirement Income Security Act (ERISA) to cover retirement advisers as well. The rule would require retirement advisers to put their clients’ interest before their own. The rule would close an exemption that currently allows advisers to steer clients into investments as long as the investment are “suitable,” even if the investments carry with them significant fees and commissions and may not necessarily be the best option for investors.
In short, the current suitability standard affords less protection to investors than the proposed fiduciary standard would provide. Given that fact, one has to question why the securities industry would not want investors to receive more protections from unscrupulous brokers. Of course, the obvious answer is that brokers and brokerage firms can make more money when they are not required to place investors’ interests ahead of their own.
The Securities Industry and Financial Markets Association is one of the groups who oppose the proposed rule, claiming that it could hurt those saving for retirement by increasing costs and providing reduced access to advice. We have seen any objective evidence that supports this claim.
The House of Representatives passed a bill in October, the Retail Investor Protection Act, requiring the Department of Labor to wait for the SEC to pass its own rule first. The White House has threatened to veto the bill, which is currently in committee with the Senate.
Under the provisions of the Dodd-Frank Act, the SEC has the authorization to develop a uniform definition of fiduciary duty that would apply to both broker-dealers and investment advisers, of which the definition for broker-dealers is currently a more relaxed one.
Call a Los Angeles Investment Fraud Attorney Today
At the moment, the rule is still just a proposal, but if it becomes law your retirement adviser’s duties may change. Contact an experienced Los Angeles investment attorney today for a consultation to discuss your rights.