The Department of Labor’s Employee Benefits Security Administration(EBSA) has put the brakes on its proposed rule on the definition of a fiduciary, which was slated to become final in the near future. EBSA’s goal for the regulatory change was to ensure that potential conflicts of interest among financial advisors would not compromise the quality of investment advice to individuals. Many employers were concerned that the regulation could increase the costs of investments in their 401(k) plans, and undermine efforts to educate employees about investments and retirement planning. The proposed regulation would also have turned employee stock ownership plan (ESOP) appraisers into fiduciaries, which was anticipated to reduce the number of professionals willing and able to perform valuations, and to increase costs.
The President’s January 2011 Executive Order, Improving Regulation and Regulatory Review, requires that the regulatory system protect the public while promoting economic growth and taking into account both benefits and costs. In compliance with this order, EBSA will coordinate with other agencies, obtain additional input, revise the proposal, and prepare an economic analysis for review by the public before finalizing the regulation. If you are interested in this fiduciary definition issue, you may want to stay tuned for more developments and opportunity to comment.
