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Labor Department will not extend public comment period on new fiduciary rule

On Behalf of | Nov 27, 2023 | Financial News

The 60-day public comment period for feedback on the U.S. Department of Labor’s new fiduciary rule is not going to be extended, Wealth Management reports.

The department’s proposed rule would update the definition of an investment advice fiduciary under the Employee Retirement Income Security Act.  It would apply when financial services providers give investment advice for a fee to retirement plan participants, individual retirement account owners and others.

The proposal would require trusted investment advisers to adhere to high standards of care and loyalty when they make investment recommendations and avoid recommendations that favor their financial and other interests at the expense of retirement savers.

Industry advocacy groups such as the Securities Industry & Financial Markets Association (SIFMA) and the Insured Retirement Institute (IRI) have called for extending the public comment period. “Such a short comment period for major federal rulemaking does not allow for meaningful public engagement,” IRI President Wayne Chopus said.

18 signatories wrote to the Department of Labor that the magnitude of such important changes to the definition of a fiduciary and the overall regulatory framework would “require significantly more time for meaningful analysis and comment” and to understand its impact on those saving for retirement.  Industry groups calling for an extension of the public comment period also noted that the 60 day time frame that ends Jan. 2 spans several holidays including Thanksgiving and Christmas, and only includes 39 work days.

But in a letter to SIFMA, Assistant Labor Secretary and Employee Benefits Security Administration (EBSA) head Lisa Gomez said the new proposal already reflects significant input from organizations dating back over a decade, adding that “numerous stakeholders representing multiple viewpoints on issues related to the proposed rulemaking package” have already weighed in informally with the department.

At a White House announcement the proposal last month, President Biden said it would close loopholes and require financial advisors to pay penalties and restitution for putting their interests ahead of their clients.  “Some advisors and brokers steer their clients toward certain investments not because it’s the best interest of the client [but] because it means the best payout for the broker,” Biden said.

The DOL’s proposal is known as the Retirement Security Rule: Definition of an Investment Advice Fiduciary.  It would ensure that financial advisors, brokers and insurance agents be held to the fiduciary standard on rollover IRAs.

The standard would also apply if the financial advisor recommends investments or receives any compensation, as well as if the investors “would reasonably expect” to receive advice guided by their best interests, according to the DOL fact sheet.

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