October 18, 2010

I recently received this important release from Fred Reish.

“The Senate Health, Education, Labor and Pensions (HELP) Committee recently held hearings on retirement security. In the course of that hearing, Phyllis Borzi, Assistant Secretary of Labor, Employee Benefits Security Administration (EBSA) noted that, on July 8, 2010, the DOL submitted a proposed regulation to the OMB (Office of Management and Budget) that would amend the regulatory definition of “fiduciary” to more broadly define those persons who render investment advice to plans. (In other words, the definition would be broadened and simplified, so that more investment recommendation services would be defined as fiduciary advice, thereby causing the provider to be a fiduciary.) The proposed amendment would take into account the practices of investment advisers and the expectations of plan officials and participants who receive the investment advice. In other words, the proposal, when adopted as a final regulation, would consider the reasonable expectations of plan fiduciaries and participants so that, if under those circumstances, the participants or fiduciaries reasonably believe that they were receiving recommendations about investments that were specifically designed for that plan (or if participants received recommendations that they reasonably felt were designed specifically for them), the provider of the recommendation would likely be found to be a fiduciary.

“It ordinarily takes the OMB about 90 days to review and approve a regulation. By that measure, the regulation should be issued by the Department within the next few days. Even if it takes longer, we cold reasonably expect to see the regulation by Thanksgiving.

“Undoubtedly, this would be a significant change for businesses and individuals who make recommendations about investments to ERISA plans or participants, but who have not previously held themselves out as fiduciaries. Among other things, it could accelerate the movement towards level compensation for investment advisers and consultants of all types. “

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