Waiting Game: Update on the New Fiduciary Standard

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“An SEC fiduciary rule has the potential to bring so many unintended consequences it shouldn’t be rushed into.”

– NAIFA President, Robert Miller

On March 29, 2012, NAFA joined trade group discussions with the Department of Labor (DOL) regarding a new proposed fiduciary standard. To this point, there’s been much contention between DOL and industry trade groups over the measures and impact of such a rule.

Assistant Secretary Phyllis C. Borzi continues to publicly state that the Labor Department is moving forward with a reproposed rule in the next few months. This new rule will differ from the old rule in that an economic analysis will be included (this despite DOL claims that it cannot do a proper analysis as the industry has not provided adequate data).

Here’s an update on some of the hot-button issues and the meeting:

  • Clarification is expected about the difference between education and investment advice, and on PTE’s (in particular an exception relating to revenue sharing). Secretary Borzi still appears to favor  a seller’s exception that only covers 401(k)s and not IRAs.
  • Trade groups recognize that some data must be provided to  show good faith even though the DOL request poses many significant challenges. It appears nearly impossible and impractical to obtain much of  the client level data they have requested. In addition, the industry is concerned over protecting the privacy of customers’ personal information. Recently, an ERISA Advisory Council report just recommended such protections and the DOL data request would appear to conflict.
  • While DOL and the SEC have been talking about coordinating rules, the DOL is publicly saying it is  moving ahead  and does not appear to be waiting for the SEC, which is moving on a slower track (it might issue a request for information in April). The SEC reportedly understands the problems with obtaining client level data.
  • Many industry players feel that no matter what the industry does, Assistant Secretary Borzi appears fixed on her policy beliefs and will move ahead without accommodating the industry’s legitimate concerns. Accordingly, many believe that the focus needs to be back on seeking Administration help and/or getting certain Hill Democrats to weigh-in with DOL. Without further administration help, the industry may well have to fall back to the less desirable option of an appropriations rider that cuts funding.
  • A new joint trade talking points paper is being crafted that will be circulated soon for review.

During the March 29 meeting, NAFA President Kim O’Brien and NAFA’s CapCity Advocates lobbyists, Wright and Cliff Andrews, met with DOL Deputy Assistant Secretary Michael Davis, along with DOL’s top staff members who are working on the rule’s re-proposal.

At the meeting, they gave no indication of when the rule would be reissued. NAFA made strides in communicating information on fixed annuities (e.g., product types, customer demographics, suitability and state regulation, distribution channels). As a result, the DOL staff appeared to be sincerely interested in learning more about fixed annuities and to recognize that these are insurance products, not securities.

The DOL staff indicated that the current prohibited transaction exemptions (e.g., PTE 84-24) would continue to apply under the new proposal and that the industry’s focus should be on having an adequate seller’s exception for fixed annuity sales. To that end, they asked NAFA to provide them with what we believe would be a workable general seller’s exception that would include fixed annuity products.

Finally, the staff also requested copies of the Illinois bulletin that sets out “do’s and don’ts” when selling as opposed to giving investment advice. After receiving input and guidance from member companies, NAFA will respond to DOL’s request.


NAFA, the National Association for Fixed Annuities, is a national trade association exclusively dedicated to promoting the awareness and understanding of fixed annuities. NAFA is the only association whose sole purpose is advocating for the fixed annuity product.

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