U.S. Labor Department fiduciary rule to cost brokers $5.8bln -SIFMA 

Usa Banks

A proposal by the Department of Labor to rein in conflicts by brokers who offer retirement advice may cost U.S. securities firms more than $5.8 billion, making it harder for Americans to build nest eggs, the Securities Industry and Financial Markets Association said Monday.

The estimate is included in eight comment letters the trade group sent to the Department of Labor, and does not include estimated costs for smaller brokerage firms that may not have the resources to offer customers many choices, SIFMA leaders told reporters.

The industry wants the Securities and Exchange Commission, and not SIFMA, to oversee sales of individual retirement accounts and other products.

The DOL proposal would require advisers who sell investments for 401(k)s and IRAs to adopt a fiduciary standard that puts customers’ financial interests ahead of their own.

That would preclude brokers and advisers who want to charge commissions from even discussing retirement products unless a customer or prospective client signs a contract in which a broker and firm agree to work in the customer’s best interest.

“The (Labor) Department goes beyond its authority and is in conflict with existing securities law in trying to establish a very prescriptive, burdensome approach that goes well beyond what a best-interest standard would or should be,” FINRA Chairman and Chief Executive Kenneth Bentsen said at a press conference.

“We agree with the DOL that more can be done to help Americans save for retirement and that there should be a best interests standard in place; however, we believe DOL is the wrong regulator to be in the lead here and the rule as written completely misses the mark,” said Kenneth E. Bentsen, Jr., SIFMA president and CEO.  “SIFMA’s comment letters reflect our ongoing concerns that the DOL’s proposal would cause harm – particularly to low and middle-income retirement savers – by limiting investors’ access to choice and guidance, while raising the cost of saving.” SIFMA

Brokerage firms would likely pass along some of their costs to customers, he said, one of many consequences of the DOL plan that defeats its purpose.

Bentsen would not say if the trade group would consider a lawsuit against the DOL if the proposal is adopted unchanged. President Barack Obama has endorsed the Labor Department plan, and Labor Secretary Thomas Perez has said the agency will consider industry objections and suggestions before finalizing it.

The Financial Industry Regulatory Authority, a regulator supervised by the SEC, last Friday said in a comment letter that the Labor Department’s proposed rule would make it very hard for brokerage firms to comply with existing rules that the two regulators enforce.

“FINRA’s comment letter reinforces our view that the Labor Department will make substantive changes to its fiduciary duty proposal in order to address industry worries that the initial draft is unworkable,” Jaret Seiberg, an analyst at Guggenheim Securities wrote in a note to clients on Monday.

Source: Reuters – U.S. Labor Department fiduciary rule to cost brokers $5.8bln -SIFMA

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