Submitted via: Regulations.gov

July 20, 2015

Employee Benefits Security Administration

Attn: Conflict of Interest Rule

Room N-5655

U.S. Department of Labor

200 Constitution Avenue, NW

Washington, DC 20210

RE: Definition of the Term “Fiduciary”; Conflict of Interest Rule-Retirement Investment 

Advice - Document Number: 2015-08831

Dear Sir or Madam:

The Credit Union National Association (CUNA) appreciates the opportunity to comment on the 

U.S. Department of Labor’s (DOL) proposed regulation defining who is a “fiduciary” of an 

employee benefit plan under the Employee Retirement Income Security Act of 1974 (ERISA) 

which includes adding brokers and advisers providing advice to individual retirement accounts to 

the definition. CUNA represents America’s credit unions and their more than 100 million 

members. 

CUNA supports the goal of this rule to protect investors and encourage all advisors to act in the 

investor’s best interest. Credit unions exist to serve their members, and inherent in the credit 

union movement is acting in a member’s best interest. Credit unions offering investment services 

to their members aim to help American families of all means receive information about saving 

for retirement and planning for their future. While many large investment firms seek high networth clients, credit unions seek to provide services to their members in all financial situations

and make it easier for these individuals to map out financial plans. 

We agree with the DOL that credit union members, and all consumers, deserve the best possible 

service when seeking information about retirement plans or Individual Retirement Account

(IRA) distributions. However, it is important to have rules that encourage and promote 

retirement savings – rather than potentially chill the ability of credit unions, or other financial 

institutions, to provide these products and services. CUNA believes that it is necessary for the 

DOL to analyze how it can more narrowly tailor the definition of “investment advice” to assure 

that credit union employees, who are only tangentially involved in providing investment 

services, are not included in the rule. Furthermore, CUNA urges the DOL to further consider 

how the barriers created by creating strict rules in this area could negatively impact consumers

access to retirement and other investment services, particularly for lower net-worth credit union 

members who may have fewer opportunities to participate in retirement and savings plans.
2

Credit Unions Provide Retirement Products & Services to Their Members 

Under the proposed rule, a person receiving compensation for advice that is individualized or 

specifically directed at a particular plan sponsor, plan participant, or IRA owner for 

consideration in making retirement investment decisions would be considered a fiduciary, unless 

they meet one of the specified carve-outs. 

For a majority of credit unions offering brokerage services, compliance with this DOL proposal 

will not sit at the credit union level because many credit unions offering these services have 

arrangements with third party brokers that clearly outline the duties and responsibilities of each 

party in the arrangement. The third party offering retirement or IRA services in most situations 

will be responsible for their own compliance with applicable laws and compliance standards, and 

is usually selling their products directly to members. Usually, credit union employees who 

interface between credit union members and the third party are only involved in the dealings in a 

minor way. 

Additionally, the proposal is not intended to implicate someone as a fiduciary if they merely 

provide participants with information about a retirement plan or IRA distribution options. 

Nevertheless, credit unions are required to conduct due diligence to ensure any third party 

arrangement and practice has proper controls in place and there is a reasonable belief that

practices are compliant. Another potential compliance consideration for credit unions is that the

definition of “education” and the “education carve-out” are overly broad in the rule, and as 

written, do not provide credit unions full assurances that they are not included. 

Furthermore, the DOL enforcement mechanism of class action litigation could sweep in credit 

unions, as sponsors of these brokers-dealers, when plaintiffs bring an action against multiple 

parties. Unfortunately, any class action defense generates additional costs that are borne by the 

members of their credit union. This will cause credit unions to have to consider whether it is in 

the best interest of the credit union and its members to engage in a broker-dealer relationship. 

Additionally, under other less common circumstances, CUNA is also concerned that credit 

unions could be directly swept into this rule. For example, it is possible that this could occur in 

some situations where credit unions share employees with a broker dealer. A letter issued by the 

National Credit Union Administration (NCUA) in 2010 provides some guidance about this type 

of arrangement stating,

“No employee of a federal credit union may provide investment advice that would 

subject the employee or credit union to federal or state securities laws. A federal credit 

union, however, may offer investment advice services to its members by establishing a 

shared employee arrangement with a third party registered investment adviser. The dual 

employee may provide investment advice on behalf of the third party, but not the credit 

union. A federal credit union may also act as a finder to introduce or otherwise bring 
3

together an outside vendor of investment adviser services to its members or wholly or 

partly own a CUSO that provides investment adviser services.”1

In the case of dual employees, it becomes less clear that the credit union employee is exempt 

from consideration as a fiduciary.

Overly Prescriptive Requirements Surrounding Compensation Would Be Burdensome for 

Credit Unions

The DOL’s proposal includes anyone who recommends specific investments and receives a fee 

as a fiduciary. However, there is a proposed exemption, “the Best Interest Contract Exemption,”

(BICE) that would provide conditional relief for common compensation, such as commissions 

and revenue sharing, that an adviser and the adviser's employing firm might receive in 

connection with investment advice to retail retirement investors. The exemption requires the firm 

and the adviser to contractually acknowledge fiduciary status, commit to adhere to basic 

standards of impartial conduct, adopt policies and procedures reasonably designed to minimize 

the harmful impact of conflicts of interest, and disclose basic information on their conflicts of 

interest and on the cost of their advice.

Credit union employees generally do not receive referral compensation for products, so they will 

not likely be involved in preparing and executing the contracts involved in the BICE exemption.

However, the rule in its current form provides a lack of clarity surrounding how the BICE will 

work in application at financial institutions. For example, under the BICE, a financial institution

is defined as an entity that retains an advisor who is an independent contractor, agent or 

registered representative. Financial institutions such as credit unions do not provide investment 

advice directly to investors; and as such, they would not be fiduciaries under the proposed 

regulatory definition. However, although not fiduciaries, financial institutions must agree to be a 

fiduciary in order for the advisor to qualify for the BIC exemption. This dichotomy again creates 

problematic ambiguity for financial institutions.

A CUNA member also expressed concern about whether a credit union that has a sponsor that 

sells insurance and investment products through various subsidiaries, including the credit union’s 

broker dealer, could be swept into the rule. In a situation such as this, a credit union may receive 

referrals for various credit union products, such as the credit union’s IRA products, and would 

have to make a clear distinction that employees are not compensated for these referrals to avoid 

being considered an ERISA fiduciary.

Sellers Exemption

The DOL has proposed a “seller’s carve-out” to avoid imposing ERISA fiduciary obligations on 

sales pitches that are part of arm’s length transactions where neither side assumes that the 

counterparty to the plan is acting as an impartial trusted advisor. Under this carve-out, the DOL 

requested comment on the “sellers” exemption for plans with 100 or more plan participants and 

whether other conditions would be more appropriate proxies. Since some credit unions serve as 

 

1 National Credit Union Administration Letter to Federal Credit Unions, “Sales of Nondeposit Investments” Letter 

No.:10-FCU-03, available at http://www.ncua.gov/Resources/Pages/LFCU2010-03.aspx (December 2010).
4

small plan sponsors, these small plan fiduciaries need to obtain essential information on 

important decisions they make regarding their investments from a number of sellers. To the 

extent that multiple sellers are in the market, encouraging multiple “pitches” from a spectrum of 

competitors, where the sellers activity does not cross the line into fiduciary status, would seem to 

be advantageous in the decision making process and promote multiple offers in a competitive 

marketplace. Given that credit unions are highly regulated financial entities with a board of 

directors, we believe that it would be appropriate to recognize all financially regulated entities as 

one criterion for a seller’s carve-out. For example, we believe that the number of plan 

participants could be lower to recognize the structure of a credit union and its role as a heavily

regulated financial entity. 

Regulatory Overlap Would Eliminate Products for Credit Union Members

The onerous and complex nature of the proposed rule, and the potential regulatory overlap, could 

have the unintended consequence of chilling options for members of credit unions seeking 

investment products. Federally chartered credits unions are supervised by the NCUA, and also 

the Consumer Financial Protection Bureau if they have $10 billion or more in assets, and statecharted credit unions are regulated at the state level. Furthermore, the Financial Industry 

Regulatory Authority and U.S. Securities and Exchange Commission already require specific 

licenses and compliance with certain laws for registered brokers, insurance agents, and 

investment advisors in credit unions. Any additional oversight in this area is unnecessarily 

duplicative and could be burdensome to credit unions who are already facing a multitude of 

regulatory hurdles. An unintended expansion of what is considered investment advice or fear of 

qualifying as an ERISA fiduciary could cause credit unions to avoid offering investment services 

to their members.

The compliance burdens for those who will qualify as ERISA fiduciaries are great, and small or 

medium size credit unions could be hesitant to engage in any activity that may sweep them into 

this expansive proposed rule. The responsibilities associated with being an ERISA fiduciary 

would require expensive and time-consuming compliance training for credit unions.

Conclusion

We believe it is important that credit unions are able to offer a full range of products and services 

to their members including products to help families save for retirement and other purposes. Any 

ambiguity and uncertainty in this area could cause financial institutions to exit or not join this 

market. Again, we urge the DOL to reconsider its overly broad proposed definition of 

“investment advice.” This would assure that ultimately consumers and credit union members are 

not negatively impacted, and that they can continue to receive information about their options for 

retirement and savings.

The reduction of any unnecessary regulatory hurdles, either intended or unintended, is important 

for the livelihood of credit unions. Thank you for the opportunity to comment on this proposal. If 

you have any questions concerning our letter, please feel free to contact me.
5

Sincerely,

Leah Dempsey

Senior Director of Advocacy & Counsel

Ldempsey@cuna.coop

202-508-3636