Dale Brown, President and CEO of the Financial Services Institute (“FSI”), wrote a letter to Representative John Kline, (R – MN) Chairman of the U.S. House Education and Workforce Committee and to ranking member George Miller, (D – CA) in response to comments made by Phyllis Borzi, Assistant Secretary of the Department of Labor, (“DOL”) in a letter to the same members of the Committee. Borzi told the ranking members she was disappointed with the lack of participation in the DOL’s request for data as part of its “effort to expand the definition of fiduciary under the Employee Retirement Income Security Act of 1974 (“ERISA”).”In Brown’s letter he is critical of DOL Assistant Secretary Borzi for what he calls an impractical request.
In December 2011, the DOL sent to broker-dealers and investment advisers a request for “data on every investment, every investor, and every recommendation in every context (IRAs, plans, and regular retail accounts) for the last 10 years within the next 30 days.” The request was made in mid-December,during the holiday season when many were not at full staff and as Brown states “the request came at a particularly demanding time for our members because they were dealing with year-end reporting, ongoing compliance requirements, new regulatory mandates and their securities regulators.”
Brown also criticized Borzi and the DOL because of the substance of the request. Neither broker-dealers nor investment advisers are required to maintain the type of business records requested for that long. Brown asserts that it was unreasonable for the DOL to expect member firms to compile this amount of information in such a short time and at such a high expense. “Even if a member firm had the resources to expend, it could not possibly have been completed in 30 days.”According to Brown, FSI and its members did their best to accommodate the DOL’s request. In its effort to aid the DOL, FSI provided the DOL with its Broker-Dealer Financial Performance Studies from 2009-2011 and to date has not received any reply communication from the DOL regarding that submission.
Another criticism from Brown is the lack of coordination between the DOL and the U.S. Securities and Exchange Commission (“SEC”). The SEC is currently working on a parallel project involving fiduciary duties that is a part of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). But according to Brown there has not been coordination between the two government organizations. “Thus far, the DOL has shown little to no interest in engaging in joint data requests or coordinated rulemaking (with the SEC).”
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