Insights from the experts in investment fiduciary responsibility.

Fiduciary Links: Why SEC-DOL "Coordination" isn't Good for Investor Protection

Posted by fi360 Team on May 28, 2013

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>>>>In his most recent Fiduciary Corner column, fi360 CEO Blaine Aikin addresses the call for greater “coordination” between the SEC and DOL as they each work on fiduciary rules. His conclusion is that the motivation is not to create a more efficient or effective regulatory scheme. Rather, it is part of a broader effort to avoid true fiduciary accountability for transactional brokers and agents who provide personalized advice, as well as for their employers. Just as “harmonization” has become a code word for dilution of the fiduciary standard for the provision of personalized advice to retail investors, “coordination” is a new euphemism for a push to avoid or weaken the ERISA fiduciary standard for advice provided to retirement plans and plan participants.

The call for “coordination” first appeared in response to the SEC’s request for data related to potential fiduciary rulemaking under Section 913 of the Dodd-Frank Act. Comments from a law firm that represents brokerage, mutual fund and banking clients contend that if the DOL re-proposes its expanded definition of fiduciary before the SEC decides whether to extend the fiduciary standard to brokers who advise retail clients, the SEC analysis of costs and benefits will be irreparably harmed. Moreover, they suggest that investors are easily confused by differences in DOL and SEC rules pertaining to the regulation of retirement assets versus assets not held in retirement assets. Now there is a bill pending in Congress that would create a “coordination” mandate.

The real source of investor confusion is that personalized advice is now offered by fiduciaries and non-fiduciaries alike. “Coordination” is a red herring argument designed to distract from that reality and divert attention from the central purpose of regulatory reform and the core responsibilities of the SEC and DOL – investor protection.

A closer look below the surface-level appeal of the “coordination” concept reveals the weaknesses of the idea. It is not only at odds with investor protection objectives, it disregards the reasons why the regulatory regimes of retirement and non-retirement accounts are different and obscures the fact that costs and benefits are most appropriately assessed in the context of the different types of accounts involved.

For more on this topic, including how the very idea of “coordination” ignores Congress’s intent when the Investment Advisers Act of 1940 and ERISA were enacted, read Blaine’s full column at

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