ARTHUR B. LABY

Professor of Law

Rutgers School of Law - Camden

Rutgers, The State University of New Jersey

217 N. Fifth Street

Camden, NJ 08102

alaby@rutgers.edu

Tel. 856-225-6272

Fax: 856-225-6516

July 20, 2015

Office of Regulations and Interpretations

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 – RIN 1210-AB32

Ladies and Gentlemen:

Thank you for the opportunity to comment on the Notice of Proposed Rulemaking, 

proposing rules to define who is considered a fiduciary of an employee benefit plan under the 

Employee Retirement Income Security Act when providing investment advice to a plan or to 

plan participants or beneficiaries. As an academic conducting research in the fiduciary area, and 

in the area of broker-dealers and investment advisers in particular, I have followed this issue with 

interest.

As explained in the preamble, many investment professionals have no obligation to 

adhere to a fiduciary standard of conduct when providing investment advice. As non-fiduciaries, 

these advisers can operate under undisclosed conflicts of interest. Moreover, although there are 

exceptions, broker-dealers typically do not operate under a fiduciary standard of conduct, 

although they often hold themselves out as financial advisers, financial planners, or wealth 

managers. Brokers’ obligations can be contrasted with investment advisers’ obligations because 

investment advisers are considered fiduciaries to their clients under the federal securities laws. 

Over the past several years, my research has focused on the different obligations that attach to 

broker-dealers (under the Securities Exchange Act of 1934) and investment advisers (under the 

Investment Advisers Act of 1940). 

In that regard, I attach to this comment letter several of my academic articles for your 

consideration. An article entitled Selling Advice and Creating Expectations: Why Brokers Should 

Be Fiduciaries, 87 WASHINGTON LAW REVIEW 707 (2012), raises questions about whether a new 

fiduciary standard would resolve customer confusion. It offers an alternative reason to support 

imposing a fiduciary obligation on brokers based on investors’ reasonable expectations. An 

article entitled Fiduciary Obligations of Broker-Dealers and Investment Advisers, 55 

VILLANOVA LAW REVIEW 701 (2010), analyzes differences between brokers’ and advisers’ 
Page 2 

duties in the context of the debate over whether to impose a fiduciary duty on brokers who give 

advice to retail customers. 

I have attached two other articles that provide historical background for the debate over 

whether to impose a fiduciary obligation on brokers. An article entitled Reforming the 

Regulation of Broker-Dealers and Investment Advisers, 65 THE BUSINESS LAWYER 395 (2010), 

provides an historical overview of changes in brokerage and advisory services and discusses the 

implications of placing a fiduciary duty on brokers. An article entitled SEC v. Capital Gains 

Research Bureau and the Investment Advisers Act of 1940, 91 BOSTON UNIVERSITY LAW REVIEW

1051 (2011), is a detailed look at the leading Supreme Court case discussing the fiduciary 

obligation of investment advisers. 

Finally, a book chapter entitled Harmonizing the Regulation of Financial Advisers, in 

Olivia S. Mitchell and Kent Smetters (eds.), THE MARKET FOR RETIREMENT FINANCIAL ADVICE

(2013), explains how the debate over imposing a fiduciary duty on brokers has migrated from the 

Securities and Exchange Commission to the courts, to Congress, back to the SEC, and now, of 

course to the Department of Labor. (I am unable to attach the book chapter to this letter.) 

If you have questions or would like additional information, please feel free to contact me. 

I can be reached at 856 225 6272 or at alaby@rutgers.edu. 

Sincerely, 

Arthur B. Laby