July 21, 2015 

By U.S. Mail and Email: executivesecretariat@dol.gov, e-ORI@dol.gov, e-OED@dol.gov

The Honorable Thomas E. Perez 

Secretary 

United States Department of Labor 

200 Constitution Avenue, N.W. 

Washington, DC 20210 

Re: Proposed Fiduciary Rulemaking 

Dear Secretary Perez: 

On behalf of the Investment Company Institute,1

 I write to summarize and to emphasize our 

concerns regarding the approach that the U.S. Department of Labor has taken in its proposed fiduciary 

rulemaking.2 The mutual fund industry is especially attuned to the needs of retirement savers because 

mutual funds hold half of retirement assets in defined contribution plans and individual retirement 

accounts (IRAs).3 The DOL’s proposal would have a dramatic impact on the ability of those 

retirement savers to obtain the guidance, products, and services they need to meet their retirement 

goals. 

 

1

 The Investment Company Institute is a leading, global association of regulated funds, including mutual funds, exchangetraded funds (ETFs), closed-end funds, and unit investment trusts (UITs) in the United States, and similar funds offered to 

investors in jurisdictions worldwide. ICI seeks to encourage adherence to high ethical standards, promote public 

understanding, and otherwise advance the interests of funds, their shareholders, directors, and advisers. 

2

 Notice of Proposed Rulemaking – Definition of the Term “Fiduciary”: Conflict of Interest Rule – Retirement Investment 

Advice, 80 Fed. Reg. 21928 (April 20, 2015); Notice of Proposed Best Interest Contract Exemption, 80 Fed. Reg. 21960 

(April 20, 2015). 

3

 ICI’s U.S. fund members manage total assets of $18.2 trillion and serve more than 90 million U.S. shareholders. The U.S. 

Retirement Market, First Quarter 2015 (June 2015), available at www.ici.org/info/ret_15_q1_data.xls. 
The Honorable Thomas E. Perez 

July 21, 2015 

Page 2 of 5 

In separate letters, ICI provides detailed comments on the Department’s proposed rule defining 

the term “fiduciary,”4

 the proposed exemptions in connection with that definition,5 and the Regulatory 

Impact Analysis justifying the Department’s proposals.6 This letter highlights the key areas of the rule 

proposal that we believe make it unworkable and conveys at a high level the changes we urge the 

Department to make to the proposed rules. 

We agree that advice providers should act in their clients’ best interest. In recent testimony, you 

assert that the Department, in its proposals, has sought to follow a “principles-based approach [that] 

obligates the adviser to honor the interests of the plan participant or IRA owner, while leaving the 

adviser and employing firm with the flexibility and discretion necessary to determine how best to satisfy 

these basic standards in light of the unique attributes of their business.”7

Had the Department adhered to a true principles-based approach, the Institute would be most 

supportive. Regrettably, however, the Department in fact has chosen a different path—it has proposed 

a set of convoluted, inflexible, and highly prescriptive rules that in no way resembles the principlesbased approach described in your testimony. The unfortunate result is that, if adopted, the proposed 

rules will severely and negatively impact retirement savers’ access to the guidance, products, and services 

they need to meet their retirement goals. 

Our several comment letters highlight many serious flaws in the proposed rules that collectively 

make them simply unworkable, while also advancing numerous constructive suggestions for improving 

the rules as proposed. The key recommendations from our comment letters are as follows: 

The Department should attach fiduciary status only where a genuine relationship of trust 

and confidence exists. The Department has proposed criteria for triggering fiduciary status that, in 

many respects, are far too intrusive and highly ambiguous. This is a matter of the deepest concern. 

Fiduciary status entails one of the highest obligations known to law—and carries with it commensurate 

liabilities. Rules governing what activities give rise to a fiduciary relationship must provide genuine 

clarity about who does or does not have that status.8

 These rules must not impede commonplace 

 

4

 Letter from David Blass and David Abbey, ICI, regarding the proposed fiduciary rule (July 21, 2015), available at 

www.ici.org/pdf/15_ici_dol_fiduciary_def_ltr.pdf. 

5

 Letter from David Blass and David Abbey, ICI, regarding the proposed best interest contract exemption (July 21, 2015), 

available at www.ici.org/pdf/15_ici_dol_fiduciary_best_interest_ltr.pdf. 

6

 Letter from Brian Reid and David Blass, ICI, regarding the Department’s Regulatory Impact Analysis (July 21, 2015), 

available at www.ici.org/pdf/15_ici_dol_fiduciary_reg_impact_ltr.pdf. 

7

 Statement of Thomas E. Perez, Secretary, Department, Before the Health, Employment, Labor and Pensions 

Subcommittee, Committee on Education and the Workforce, U.S. House of Representatives (June 17, 2015), at p. 4, 

available at edworkforce.house.gov/uploadedfiles/testimony_perez.pdf. 

8

 Testimony of Paul Schott Stevens before the Department (March 1, 2011), available at 

www.ici.org/policy/ici_testimony/11_dol_fiduciary_tmny. 
The Honorable Thomas E. Perez 

July 21, 2015 

Page 3 of 5 

financial interactions, and they must allow plans and retirement savers to obtain investments that meet 

their needs and to gather a range of market input on which to base decisions. 

We are particularly troubled that the Department’s proposal would attach fiduciary status to 

many common interactions that do not entail a fiduciary relationship, particularly with respect to call 

center, walk-in center, and website interactions. The practical consequence will be quite damaging for 

retirement savers, as providers may have no choice but to cease offering such services. 

Our comment letter regarding the fiduciary definition provides several reasonable suggestions 

for avoiding this outcome. Chief among them is for the Department to return to prior guidance that 

draws a commonsense line between the provision of fiduciary advice and that of information and 

education. 

The Department should recognize that simply selling an investment product or service is 

not a fiduciary act. Small employers, as well as retirement savers generally, should have the option to 

choose among a wide range of investment products and services. Service providers should be able to 

provide investors with information and data about those options, both during the sales process and on 

an ongoing basis. As we demonstrate in our letter, there is compelling evidence that Congress did not 

intend for ERISA to disrupt the lawful functioning of the securities markets, to prevent retirement 

investors from accessing investments, or to turn the “ordinary functions of consultants and advisers” 

into fiduciary activities. The Department’s proposals, at a minimum, should conform to Congress’s 

clear intent in the underlying statute. 

If the Department retains a “Best Interest Contract” exemption (BIC Exemption), it 

should greatly simplify that exemption. The Department suggests that the great expanse of its 

fiduciary definition can be narrowed substantially by its newly proposed BIC Exemption. We strongly 

disagree. That exemption as currently drafted is quite useless because of the multitude of ambiguous 

and impractical conditions to which it is subject. The very granular representations, warranties, and 

disclosures proposed by the Department are harmful, and in any case are wholly inconsistent with a 

principles-based approach. 

If it actually intends the BIC Exemption to have any practical value, the Department should 

simplify it as follows: 

• Take a truly principles-based approach. The BIC Exemption will work only if the 

Department strips it of excessive conditions. A starting point would be eliminating the 

proposed contractual warranties and representations. They are not needed to protect 

investors and only serve to expose firms to significant new litigation risk. 

• Streamline the required disclosures. The proposed disclosures needed to qualify for the 

BIC Exemption are redundant, granular, costly, and unreasonable. As proposed, these 

disclosures would serve only to overwhelm retirement investors, in the unlikely event that 
The Honorable Thomas E. Perez 

July 21, 2015 

Page 4 of 5 

investors actually read them. The Department should revise the disclosure conditions to 

align them with the far more workable precedents the Department has adopted under 

ERISA sections 408(b)(2) and 404(a). 

• Expand the scope of coverage of the BIC Exemption. The BIC Exemption contains 

exclusions and limitations that needlessly harm broad classes of retirement plans and savers. 

The BIC Exemption takes a “legal list” kind of approach—long ago abandoned by 

mainstream trust law—in proposing a list of certain favored investment choices and 

eschewing other investment choices not on the list. As a result, the proposed rules would 

unnecessarily and inappropriately restrict retirement investors’ choices. This is, quite 

simply, an altogether improper role for the Department or any other regulator, and it 

should have no place in a final rule. In addition, the Department must expand the BIC 

Exemption to cover advice provided to all small employers. There is absolutely no sound 

policy justification for refusing sponsors of small plans access to information and advice 

about the retirement plans they sponsor and administer. 

• Eliminate compliance traps. The proposed written policies and procedures requirement 

for “material conflicts of interest” pose insuperable compliance hurdles for advice providers. 

The Department must clarify and simplify these requirements. 

• Avoid retroactive application of the rules. The Department must modify the proposed 

exemption so that it does not unnecessarily harm investors by prohibiting ongoing advice 

on assets acquired prior to the rules’ implementation dates. 

The Department’s speculation about a streamlined exemption for “high-quality low-fee” 

investment options poses numerous conceptual issues that preclude meaningful comment. The 

Department’s questions about a “streamlined” exemption from ERISA’s prohibitions for so-called 

“high-quality low-fee” investment products frankly are puzzling. The Department does not actually 

propose such an exemption; nor does it specify how such an exemption would work or indicate what 

investments would or would not qualify. We have grave concerns about the feasibility and wisdom of 

such an exemption, and the Department clearly has not provided sufficient information about this 

aspect of its proposal to allow the public to comment in any meaningful way. 

The Department must revisit its Regulatory Impact Analysis. The Department’s Regulatory 

Impact Analysis is fatally flawed: it simply does not support the Department’s assertion that there is a 

“substantial failure of the market for retirement advice.” The Department does not, for example, 

consider facts that contradict its conclusions. It also does not properly consider how the proposal could 

limit retirement savers’ access to guidance, products, and services, or how such limits could affect 

savers—particularly lower- and middle-income savers with smaller account balances. 

 
The Honorable Thomas E. Perez 

July 21, 2015 

Page 5 of 5 

We encourage the Department, in the strongest possible terms, to revisit the analysis to ensure 

that the economic justification for the proposed rules meets at least the minimum expected of 

regulatory agencies, for in its current form it surely does not. Doing so should lead the Department to 

the conclusion that a different, more targeted, and principles-based approach to fiduciary rulemaking 

will best serve the interest of retirement savers. 

* * * * * 

On behalf of the Institute and all of our members, I thank you for the open, ongoing dialogue 

we have pursued with the Department and all of its staff throughout your consideration of new rules in 

this important area. Thank you for your consideration of our views, analysis, research, and the 

regulatory alternatives we advance. We stand ready to assist the Department in further refining its 

proposal so that any final rules will protect and advance the interests of retirement savers, an objective 

we strongly share. 

Should you or your staff require any additional information or have questions regarding our 

comments, please contact me at 202-326-5901 or paul.stevens@ici.org, or David Blass, ICI General 

Counsel, at 202-326-5815 or david.blass@ici.org. 

 

 Sincerely, 

 

Paul Schott Stevens 

 President & CEO 

 Investment Company Institute 

 

cc: The Honorable Jeffrey Zients, Director of the National Economic Council and Assistant to 

the President for Economic Policy 

The Honorable Phyllis Borzi, Assistant Secretary of Labor, Employee Benefits Security 

Administration, U.S. Department of Labor 

 

 Judy Mares, Deputy Assistant Secretary, Employee Benefits Security Administration, U.S. 

Department of Labor 

Timothy Hauser, Deputy Assistant Secretary, Employee Benefits Security Administration, 

U.S. Department of Labor