Finetuning ‘Fiduciary’ — DOL taking Another Stab at Definition

Thanks to President Obama’s executive order on revisiting federal regulations, and likely a flood of comments from the employee benefits community, the U.S. Department of Labor (DOL) is scratching its proposed rule on the definition of fiduciary and will be issuing a revised one in early 2012.

In what likely could be considered an understatement, DOL noted that its “decision to re-propose is in part a response to requests from the public, including members of Congress, that the agency allow an opportunity for more input on the rule.”  Ever since the rule was issued, DOL has heard an earful of concerns, and itself notes that it has received more than 260 written public comments, as well as comments from two days of open hearings and “more than three dozen individual meetings with interested parties held by the agency.”

Here’s what the re-proposal will allow the agency to do:

Specifically, the agency anticipates revising provisions of the rule including, but not restricted to, clarifying that fiduciary advice is limited to individualized advice directed to specific parties, responding to concerns about the application of the regulation to routine appraisals and clarifying the limits of the rule’s application to arm’s length commercial transactions, such as swap transactions.

Also anticipated are exemptions addressing concerns about the impact of the new regulation on the current fee practices of brokers and advisers, and clarifying the continued applicability of exemptions that have long been in existence that allow brokers to receive commissions in connection with mutual funds, stocks and insurance products. The agency will carefully craft new or amended exemptions that can best preserve beneficial fee practices, while at the same time protecting plan participants and individual retirement account owners from abusive practices and conflicted advice.

For a copy of the DOL press release, go here. For more background on the rule, including a list of comments, go here.