In a public hearing on March 1 and 2, 2011, Assistant Secretary of Labor for the Employee Benefits Security Administration (”EBSA”) Phyllis Borzi addressed the Department of Labor’s proposed fiduciary regulation, released in October 2010. The proposed regulation would update and expand the definition of a fiduciary under Section 3(21)(A) of ERISA. Under the proposed regulation, individuals preparing employer stock evaluations and similar investment advice would be considered ERISA fiduciaries. Speaking in support of the proposed change, Borzi pointed to the “tremendous evolution in the marketplace” in the 35-plus years since the existing fiduciary regulations were adopted and stressed the necessity of improving transparency and accountability.
At the hearing, critics of the proposed regulation urged EBSA to coordinate the fiduciary rulemaking with other agencies, including the Securities and Exchange Commission (”SEC”) and the Commodities Futures Trading Commission (”CFTC”). Explaining that EBSA was working to harmonize the regulations with SEC and CFTC fiduciary standards, Borzi declined to defer entirely to those agencies regarding establishing new fiduciary standards. Borzi noted that the aims and structure of ERISA differed from other relevant statutes, such as the Consumer Protection Act and the Dodd-Frank Act, making it unworkable to completely synchronize the regulations.
Borzi explained that EBSA had no intention to issue a final fiduciary regulation that would require a covered party to be in violation of other statutes and regulations, but was unable to provide assurances that compliance with the EBSA regulation would necessarily comply with other fiduciary provisions. In issuing these caveats, Borzi noted that the proposed regulation would not directly conflict with existing Internal Revenue Service rules.
Prior to the hearing, Borzi stated that EBSA will likely issue a final regulation by the end of 2011.