RBC Wealth Management, a division of RBC Capital Markets, LLC Member NYSE/FINRA/SIPC.

July 20, 2015

VIA EMAIL (e-ORI@dol.gov and e-OED@dol.gov)

Office of Regulations and Interpretations

Office of Exemption Determinations

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 (RIN 1210-AB32)

Proposed Best Interest Contract Exemption (ZRIN: 1210-ZA25)

Proposed Class Exemption for Principal Transactions in Certain Debt Securities 

Between Investment Advice Fiduciaries and Employee Benefit Plans and IRAs 

(ZRIN: 1210-ZA25)

Proposed Amendments to Various Exemptions (ZRIN: 1210-ZA25)

Ladies and Gentlemen:

RBC Capital Markets, LLC is pleased to provide comments regarding the 

Department of Labor’s (“Department”) Proposed Rule under the Employee Retirement 

Income Security Act of 1974, as amended (“ERISA”) that will redefine the term 

“fiduciary” (the “Proposed Rule”) under section 3(21) of ERISA and section 4975(e) of 

the Internal Revenue Code of 1986, as amended (the “Code”) as well as the 

accompanying Proposed Best Interest Contract Exemption (“BIC Exemption”) and 

Proposed Principal Trading Exemption (“PT Exemption”). 

RBC Capital Markets, LLC, together with its parent company, Royal Bank of 

Canada and its affiliates, is a global financial services firm that provides products and 

services to a large and diversified group of clients. RBC Capital Markets, LLC is 

registered with the Securities and Exchange Commission (“SEC”) as both an 

investment adviser and broker-dealer and, through its RBC Wealth Management –

U.S. division (“RBC Wealth Management”), offers a wide variety of financial products 

and services to its clients.
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I. EXECUTIVE SUMMARY

We truly appreciate the opportunity to comment and hope that our comments 

are helpful to the Department. While we believe in the adoption of a single, wellarticulated and clearly defined best interest standard of care applicable to all financial 

service professionals, we do not agree that the absence of such a standard of care 

across the financial services industry is the reason that American workers are not 

saving enough for retirement. Even worse, we fear that such a singular focus on 

conflicts in the brokerage business model will unwittingly permit real issues – such as 

a lack of adequate savings incentives and financial planning literacy – to perpetuate 

unaddressed. 

We are concerned that the Proposed Rule and Proposed Exemptions will be 

counterproductive insofar as they will limit investor choice, increase investor cost, 

generate investor confusion, and limit the availability of professional guidance to those 

who need it most. A preferable approach, in our view, would build upon the extensive 

investor protections contained in current laws and regulations, and establish a clearly 

defined best interest standard of care applicable to all financial service professionals 

across all types of accounts. We would welcome the opportunity to work with the 

Department to craft and implement a workable approach to ensure that retirement 

savers continue to receive the assistance and guidance they need to achieve their 

financial goals, without unduly restricting their choices of products, services, or the 

way in which they pay for their services. 

Our initial assessment of the Proposed Rule and accompanying Proposed 

Prohibited Transaction Exemptions is as follows:

• Compliance with the conditions of the BIC Exemption will be too costly, 

onerous, and risky for us to rely upon the exemption.

• Because of the uncertainty created by the proposed definition of fiduciary 

“investment advice” and limited carve-outs, including for investment 

education, as well as our inability to conform to the conditions of the BIC 

Exemption given the costs and risks associated with the exemption, we are 

concerned that the commission-based brokerage model may no longer be an 

available alternative for small retail retirement savers. If we were to limit 

small retail customers to execution-only types of services, these customers 
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would not be afforded access to the guidance, education, and other 

assistance that they have come to expect from their financial professionals.

In releasing the Proposed Rule, the Department states that it has “worked hard 

to understand the impact of the proposed rule on firms subject to the securities laws 

and other federal laws, and to take the effects of those laws into account so as to 

appropriately calibrate the impact of the rule on those firms....In the Department’s 

view, it neither undermines, nor contradicts, the provisions or purposes of the 

securities laws, but instead works in harmony with them.” We respectfully, but firmly, 

disagree with the Department’s view. Our policies and procedures, trading systems, 

disclosures, legal documentation, compliance oversight, financial models, and thirdparty relationships have been built over a period of 40+ years in a manner reasonably 

designed to ensure compliance with the regulatory framework established and 

maintained by each state, the SEC, FINRA, the MSRB, and the Department. As a 

member of a highly regulated industry, we take each new rule proposal seriously and 

study how to implement it. In meeting our regulatory obligations, we have to consider 

building compliance programs to address each component of the Proposed Rule. For 

the reasons discussed in our letter and many letters submitted by similarly situated 

financial services firms and trade groups, we do not believe we can implement such 

systems in a cost effective manner and continue to provide the valuable service that 

our clients have come to depend on. 

Moreover, we are concerned that the Proposed Rule and the exemptions do not 

contemplate that our typical retail client will have multiple types of accounts, both 

retirement and non-retirement. The Proposed Rule would require us to apply differing 

best interest standards, compliance systems, payment grids, permissible securities to 

differing accounts of the same client. The confusion caused by this very plausible 

scenario seems at odds with what our end goal should be: to enhance the ability of all 

Americans saving for retirement to access guidance, education, and assistance, in 

addition to advice, in planning how to meet their retirement goals. 

Though the Department also states that it “has coordinated – and will continue 

to coordinate – its efforts with other federal agencies to ensure that the various legal 

regimes are harmonized to the fullest extent possible,” we have seen little evidence of 

such harmonization. Section 913 of the Dodd-Frank Wall Street Reform and 

Consumer Protection Act of 2010 (“Dodd-Frank”) directed the SEC to study the effects 
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of subjecting broker-dealers and investment advisers to a uniform standard of care 

that requires them to act in the best interests of retail customers, while protecting a 

broker-dealer’s ability to receive commission-based compensation. As you know, the 

SEC has been considering whether to propose a rule establishing a uniform fiduciary 

standard that would apply to personalized investment advice across all of a retail 

customer’s accounts. We strongly believe that a uniform standard promulgated jointly 

with the SEC is the more practical, common-sense solution and would result in a 

greater benefit to investors (including retirement investors) and less disruption and 

interruption of services for our client base. We urge the Department to delay this 

Proposed Rule in order to pursue a collaborative approach with the SEC and the 

primary banking and insurance regulators in order to minimize the potential for 

unintended consequences on the U.S. capital markets generally and retirement savers 

specifically. Such an approach would also minimize confusion among retirement 

savers as to the standard of care when receiving advice about different accounts, and 

would permit financial institutions to coordinate their compliance programs across 

such accounts without incurring additional, and in some cases duplicative, costs in 

designing separate compliance programs for different account types.

II. DEFINITION OF INVESTMENT ADVICE

Our primary concern with the Department’s proposed redefinition of investment 

advice is that it will “chill” most communications or educational activities directed 

toward retirement savers, including those individuals who may have the greatest need 

for such education and guidance. We believe that the proposal’s education carve-out 

is impractical in that it would restrict our ability to provide real-world examples of 

asset allocations to those individuals that most likely need it the most. We are 

concerned that the proposal will cause sales conversations, RFP responses, and 

general advertisements to potentially be categorized as fiduciary advice. It will also 

halt any incidental advice currently provided by our financial professionals in 

brokerage accounts, and silence much needed factual education about distribution 

and rollover options. 

Lack of Clear and Objective Standards as to Who is a Fiduciary

We urge the Department to revise its Proposed Rule to ensure that the 

standards for determining whether a person is providing “investment advice” and, 
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therefore, is a “fiduciary” within the meaning of Section 3(21) of ERISA and Section 

4975(e) of the Code, are clear and objective. We are concerned that the breadth and 

generality of the Proposed Rule and the lack of clear, objective standards will make it 

very difficult for financial professionals to determine, in advance, whether or not their 

activities will fall within the definition of a “fiduciary”. 

We are particularly concerned that the Department has removed the 

requirement that there be a “mutual” understanding between the financial 

professional and recipient that the recommendation being provided is intended to be 

“investment advice,” and replaced this clear standard with what may be as little as a 

unilateral understanding, which may ultimately be asserted by the retirement investor 

after the fact. 

We take great care in defining our role and responsibilities with clients. Our 

contractual provisions are crafted to make clear the rights and obligations of each 

party, and our program structures, supervision and surveillance, compliance oversight 

and extensive training programs are developed on the basis of those legal obligations. 

At the time of entering into an arrangement, both parties are free to negotiate or 

modify these terms as the situation warrants – but once the agreement is executed, we 

must be able to operate based on a mutually agreed-upon level of obligations. The 

Proposed Rule’s deletion of “mutual” is, therefore, particularly problematic, as we 

believe the roles of each party to any transaction should be clearly defined and 

understood by both parties in advance – one party should not be given the ability to 

recast it after the fact. 

Rollover Language is Problematic

We also have concerns with the inclusion of the rollover language in 

subparagraphs (i) and (ii) of the Proposed Rule. We understand the Department’s 

concerns that financial professionals may be conflicted and may have financial 

incentives to recommend that clients roll over plan assets to an IRA. The Department 

should consider that both FINRA and the SEC have devoted significant resources and 

attention to address these concerns and ensure that the industry is providing 

information about rollovers in a balanced manner that complies with the financial 

professional’s obligations under the federal securities laws. As the Department 

recognized in Advisory Opinion 2005-23A, in many cases answering questions and 
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providing information about rollovers and other distribution options available under a 

plan are ministerial functions, where the client’s decision may be made based on a 

number of important factors other than investments, such as online access and tools, 

and the ability to take distributions from an IRA at will. To now propose a complete 

change in approach to rollovers may result in very valuable assistance and education 

not being given at all. For example, assistance in determining how best to maximize 

the benefit of a tax-favored retirement account may not be as readily available as it 

currently is, which will harm retirement savers, particularly those currently in 

retirement who are trying to maximize their savings. 

We are also troubled that the Department seems to have taken the view that 

nearly every conversation regarding rollovers should be treated as fiduciary advice. We 

firmly believe that access to factual education about distribution and rollover options 

and processes is critically important to retirement investors and should not be 

fiduciary advice. To this end, we request that the Department clarify the investment 

education carve-out so that providing the information and education specified in 

FINRA Regulatory Notice 13-45 would not constitute “investment advice” under the 

Proposed Rule. 

Moreover, we are also unclear as to how the Department would treat a situation 

where a financial professional has a preliminary discussion with an existing nonretirement client about the possible distribution options that a client may have and 

that client later decides to complete a rollover. 

• Is that financial professional prohibited from servicing that subsequent 

rollover account? 

• If the initial conversation was a recommendation, does that taint the firm 

from receiving any subsequent rollover?

We would appreciate clarification from the Department on this very common situation. 

The cumulative impact of these changes may result in financial institutions 

prohibiting any and all employees, be they financial professionals, call center 

employees or recordkeepers, from providing the most basic of financial information to 

individuals and plans. We believe that this would be an unfortunate outcome and, 

therefore, request that the Department clarify that financial professionals can provide 

education and guidance regarding rollovers, including pitching their own products and 
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services, without running afoul of the prohibited transaction rules. We request that 

the investment education carve-out be revised to specifically incorporate the elements 

of FINRA Regulatory Notice 13-45 as education. 

III. CARVE-OUTS

Counterparty’s/Seller’s Carve-Out

We appreciate that the Department recognizes the need to carve-out 

conversations that occur on a daily basis in the ordinary course of how we conduct 

business. However, we are concerned that this carve-out is unnecessarily limited in 

scope and subject to unworkable conditions. First, excluding small plans, 

participants, and sophisticated IRA owners from the scope of the carve-out is 

unnecessary. The Department presumes that a “retail” investor cannot discern that 

the financial professional is selling a service or product. We respectfully disagree. If a 

financial professional makes clear she is selling a service or product and provides clear 

disclosure that she is not acting, or intending to act, in a fiduciary capacity with 

respect to the client, then we believe that clients will be able to discern non-fiduciary 

activity. Retirement investors should have the choice to decide whether they want to 

enter into a fiduciary relationship with a financial institution and pay for that 

relationship or, alternatively hire non-fiduciary service providers and pay for their 

services. By excluding sophisticated small plans, participants, and IRA owners from 

the carve-out, we question how our financial professionals will be able to propose new 

or enhanced services or products for our clients and prospective clients. We further 

note that the premise that retail clients cannot enter into arm’s-length arrangements 

seems to be inconsistent with the Department’s view that fiduciaries and clients are 

free to limit the scope of their fiduciary responsibility by contract. 

Secondly, we strongly believe that the Proposed Rule needs to clarify that the 

seller’s carve-out includes the selling of services. We think the regulation needs to 

clarify that a person or entity seeking to be hired – as a broker, a custodian, a 

fiduciary, an advisor, a trustee – initially, for a longer engagement, or for a new 

mandate or new account, or that engages in a one-on-one conversation, responds to 

an RFP, or places an advertisement in a newspaper, is not a fiduciary regardless of 

what kind of investment suggestions are contained in that sales context. We have 
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received indications that the Department intends to address this omission and we look 

forward to reviewing any revised language on this point.

Third, we would appreciate clarity that representations and warranties about 

the sophistication of a potential client can be received at the time of the transaction or 

the service provider being retained, as opposed to at the time of the recommendation. 

Investment Education

While we appreciate the Department’s recognition that a certain level of 

investment education is beneficial to clients and prospects, we believe that the 

restriction on identifying specific investment products would materially reduce our 

ability to provide the amount and quality of educational material that retirement 

savers have come to expect. To provide education to a retirement saver about risk and 

return, asset allocation, and the benefits of diversification, without the ability to 

illustrate how one might implement a strategy based on those considerations leaves 

the client without meaningful guidance about how to use that information. The 

Proposed Rule’s restriction on identifying specific investment products will generally 

push high balance retirement accounts into advisory products to receive 

implementation services and potentially abandon low balance accounts to execution 

only services where the client will be on his or her own. 

IV. BEST INTEREST CONTRACT EXEMPTION

While we certainly appreciate the Department’s stated objective to “preserve 

beneficial business models by taking a standards-based approach that will broadly 

permit firms to continue to rely on common fee practices...,” the proposed BIC 

Exemption presents such monumental financial, operational, regulatory, and legal 

hurdles that we do not anticipate that we (or others in the industry) will be in a 

position to avail ourselves of the BIC Exemption. We briefly summarize below the 

practical realities that make compliance with the BIC Exemption unfeasible.

Advice Recipients

The BIC Exemption limits the definition of Retirement Investor to, among other 

categories, “a plan sponsor of a plan with fewer than 100 participants that is not 

participant directed.” Accordingly, by limiting the BIC exemption to “retail” retirement 

investors, we would be prohibited from receiving fees from any third party on behalf of 
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any small, participant-directed plan. Our financial professionals routinely help their 

small business owner clients establish plans for the benefit of their employees. Most 

commonly, those plans are participant directed with fewer than 100 participants and 

are held at our organization as open brokerage, or at open architecture mutual fund 

platforms. In either case, our receipt of compensation would be prohibited if we were 

to be deemed a fiduciary under the Proposed Rule, and the BIC Exemption affords no 

relief given the exclusion of small, participant-directed plans. By creating an arbitrary 

limit on advice recipients under the BIC Exemption, the Proposed Rule would 

effectively preclude us from servicing retirement investors who may have a significant 

need for financial assistance and could diminish the availability of employersponsored retirement plans at small businesses. Moreover, from an operational 

perspective, it is unclear how the Department would require firms to monitor for and 

track the 100-participant limit and we would seek clarification on this point. 

Specifically, how is a firm supposed to monitor and react to changes in a plan’s 

demographics where the plan’s population may rise above or descend below the 100 

participant limit at any time? 

Contract Requirements

Timing. Requiring a contract to be entered into prior to making any 

recommendation creates significant compliance risk with no meaningful benefit to 

retail investors. We urge the Department to replace this requirement (as well as the 

contract timing requirement in the PT Exemption discussed later), to a more workable 

standard such as requiring that the contract be entered into prior to executing the 

transaction.

Re-contracting with Existing Clients. The task of re-executing existing 

contracts with existing clients alone would prevent us from relying on the BIC 

Exemption. With over 250,000 accounts that would need to be repapered, we could 

not possibly obtain signed amendments to our client agreements within an eightmonth applicability period. Upon release of the final rule, we would need 

approximately three to six months to properly evaluate and draft a compliant form of 

amendment. Then, obtaining wet signatures from each of the 250,000 plus clients 

would involve a process that could take multiple years as clients have no urgency to 

re-sign an agreement that they thought was already in place. The process would 

require a significant education and communication plan and would still not achieve 
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anywhere near 100% compliance. Taken to its logical conclusion, we would then be 

required to cut off any communication, education or advice with those “unsigned” 

clients for fear of committing a prohibited transaction without an appropriate 

exemption. We suggest that a much more realistic approach with a greater likelihood 

of success would be to replace the signed contract requirement for existing accounts 

with a contract amendment to the existing agreement mailed to clients through a 

negative consent process. 

Execution of Contract by Financial Advisor. Requiring the signature of a 

financial professional is unnecessary and will create numerous practical difficulties 

and unintended consequences. Our financial professionals serve as agents of the firm 

and the firm is the contracting party and ultimately responsible for supervising the 

actions of the financial professional and protecting the client. Any wrongdoing or 

breach of contract by the financial professional would be actionable by the client 

against the firm. 

The Proposed Rule’s contract requirements raise additional questions, as well, 

including: 

• Would the firm be required to enter into new contracts if a financial 

professional were to leave the firm and go to a new firm? 

• If the financial relationship operates on a team approach, would all team 

members (which may include 10 or more persons) be required to sign the 

agreement? 

• If one member of a team departs and is replaced, would a new agreement 

be required? 

For these reasons we request that any contractual requirements require a written 

contract solely between the firm and the retirement investor, and not require any 

individual financial professional to be a party to the contract.

Warranties. Without delving into the legal implications of the numerous 

warranties that would be required under the proposed BIC Exemption, suffice it to say 

that the impact of the warranties on compensation practices would force a complete 

overhaul of how our financial professionals are currently compensated despite the 

Department’s stated goal of preserving “beneficial business models by taking a 
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standards-based approach that will broadly permit firms to continue to rely on 

common fee practices.” Specifically, an outright prohibition on “quotas, appraisals, 

performance or personnel actions, bonuses, contests, special awards, differential 

compensation” would require a complete systems change that would be years in the 

making and would necessarily include a full redesign of new programs and systems 

that pay level compensation and incorporate a flat grid for retirement accounts. The 

end result would be two different compensation structures for retirement accounts 

and non-retirement accounts. An additional required workstream would be 

renegotiating compensation structures with numerous third parties, including product 

representatives, service providers and, in some instances, our own financial 

professionals. This requirement alone, given the eight month compliance timeframe, 

would require us to forego reliance on the BIC Exemption, terminate relationships 

with smaller plans and IRAs, and transition remaining retirement brokerage accounts 

to our fee-based advisory platform. 

We believe that full and prominent disclosures, brought to the client’s attention 

at appropriate times (such as upon entering into an agreement or arrangement for 

services and upon material changes to previously disclosed information), will do far 

more to shed light on fee differences and educate clients regarding these differences 

than arbitrarily banning fee differences in a business model that treats agency 

transaction compensation, principal transaction spreads, mutual fund fees, and 

insurance company commissions differently. We believe that the Department can 

accomplish its stated goal of protecting retirement savers without harming 

commission-based brokerage by adopting a disclosure based regime for retail investors 

similar to the ERISA Section 408(b)(2) disclosure requirements. 

Transactions Covered by the BIC Exemption

We believe the Proposed Rule’s attempt to create an “approved list” of eligible 

assets is counterproductive and inflexible, and effectively substitutes the Department’s 

judgment for that of the plan fiduciary, IRA owner, or plan participant. Without 

delving into the specifics of the “approved list,” it appears that the Proposed Rule 

would put the Department in the position of deciding which narrow set of investments 

are appropriate for all retirement investors. In this regard, the Proposed Rule raises 

several significant questions. For example, on what basis will the Department 

reevaluate or update this list? What level of resources will the Department devote to 
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reviewing and adding products and services to the list? How will the Department 

ensure that it does not curtail innovation and product development in the retirement 

market? 

Impartial Conduct Standards

The BIC Exemption requires the financial professional and the firm to 

affirmatively agree to comply with, and in fact comply with, impartial conduct 

standards. One requirement of the impartial conduct standards is that the financial 

professional and the firm provide advice that is “in the Best Interest of the Retirement 

Investor.” We have concerns about the language in the best interest standard that 

purports to require the financial professional and the firm to prove that advice was 

given “without regard to the financial or other interests of the Adviser, Financial 

Institution or any Affiliate, Related Entity, or other party.” First, we believe the 

requirement that advice be “without regard” for the financial interests of the financial 

professional and the firm would require the financial professional and firm to prove a 

negative. It is unclear from the proposal as to how the Department expects a firm to 

design a compliance program to do this, other than to adopt a level compensation 

model. Because of these uncertainties, a firm will be unable to meaningfully review for 

compliance, thereby exposing the firm to regulatory and litigation risk for each 

recommendation made. Further, with respect to the “Related Entity, or other party” 

language, we have difficulty understanding what the inclusion of these other interests 

and other parties is intended to address and would request that either the language is 

removed or more clearly defined. 

Disclosure Requirements

With respect to the disclosure requirements under the BIC Exemption, 

including the point-of-sale and website disclosures , we agree that clear disclosures 

related to costs and potential conflicts of interest, would assist a retirement investor’s 

ability to assess a transaction or arrangement. However, we believe that it would be 

cost prohibitive for our firm (and most of our industry peers) to implement and 

maintain the proposed disclosure regime. It will also expose firms to strict liability 

under the prohibited transaction rules for inadvertent and good faith errors. For these 

reasons we believe that the BIC Exemption, as proposed, is impractical and 

unworkable and that the Department has significantly under-projected the costs of 
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implementing and complying with this exemption. Moreover, we question why the 

Department would introduce a completely new disclosure regime a mere three years 

after the costly disclosures required by the 2012 amendments under ERISA § 

408(b)(2). With these considerations in mind, we request that the Department 

leverage and synergize any new disclosure requirements with the ERISA § 408(b)(2) 

framework, such as by requiring a 408(b)(2) type disclosure notice for retail investors.

Exemption for Pre-Existing Transaction

The supplemental relief for pre-existing transactions applies to the receipt of 

compensation for services in connection with the purchase, holding or sale of an 

“Asset” by IRAs, participant accounts, and all ERISA plans, regardless of size and 

whether or not the plan is participant directed. The supplemental relief would cover 

financial professionals who were not considered fiduciaries prior to the effective date of 

these new rules. We appreciate the Proposed Rule’s attempt to provide transition 

relief; however, we believe that retirement investors will be greatly disserved if they are 

cut off from advice at the effective date unless the client and firm both agree to fit the 

arrangement into the BIC Exemption and the assets involved actually meet the 

Department’s approved list of assets. If the client does not agree to the BIC 

requirements or holds an asset that the Department does not approve, we would be 

prevented from providing any additional information or assistance to the client. 

We request broader transition relief from the prohibited transaction rules for 

these historic holdings, and urge the Department to work with the industry to 

determine the best approach to grandfathering investments that are (a) acquired as 

part of an automatic savings and investment program, and (b) holdings that do not 

meet the definition of the term “Asset” under the BIC Exemption. 

Denying robust transition relief for these historic investments would (1) deny 

clients from receiving much needed ongoing assistance with time-sensitive investment 

products, (2) upend legitimate expectations of the contracting parties, (3) create a 

confusing transition for the retirement investor, and (4) create a huge compliance 

burden to determine how such assets should be treated under the new rules. 

Low Fee Streamlined Exemption

The Department has requested comment on whether it should issue a separate 

class exemption, with fewer conditions, for advice concerning low-fee index funds. 
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While we appreciate the Department’s efforts to simplify investment advice for the 

retirement investor, we reiterate our concern that the Proposed Rule could have the 

effect of substituting the Department’s judgment for that of a client who self-directs 

his or her retirement investments. Clients should be free to pick and choose the 

products and services that they believe will be most beneficial for them in pursuing 

their financial goals. To accomplish this, clients should be free to direct their 

retirement savings into any type of investment that they are otherwise legally 

permitted to hold. The Proposed Rule should not in effect create artificial barriers to 

certain types of investments while at the same time facilitating investment in the 

Department’s preferred investment types. Accordingly, we are not in favor of this 

approach. 

V. PRINCIPAL TRADING EXEMPTION

Eligible Securities

As discussed above with respect to the BIC Exemption, we are concerned that 

the proposed PT Exemption covers only a very limited list of securities and does not 

cover many routine securities sold on a principal basis. We reiterate our concern that 

the Proposed Rule could in effect substitute the Department’s judgment of investments 

for that of the retirement investor or her chosen financial professional. To create yet 

another “approved list” of investments for the PT Exemption seems misguided at best 

and potentially damaging to retirement investors at worst. By not permitting some 

investments to be traded on a principal basis, the Department is essentially making 

these investments more expensive to retirement investors and, in some cases 

practically unavailable, due to the way those securities are typically traded. 

Additionally, assuming the Department is unwilling to eliminate its “approved 

list” construct, we ask the Department to add brokered certificates of deposit and unit 

investment trusts to the list of approved assets. Brokered CDs are most often sold on 

a principal basis and without this relief, this safe and appropriate investment type will 

not be cost effectively available to IRAs and plans. Similarly, unit investment trusts 

are transparent investment vehicles that maintain the same investment mix for their 

term, allowing investors to understand exactly what the investment mix in the trust 

will be for the entire holding period. They are like an actively managed product in that 

the security mix need not track an index, as well as a passive investment in that there 
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is very little trading activity and transaction costs within the trust. Unit investment 

trusts are regulated by the SEC under the Securities Act of 1933 and the Investment 

Company Act of 1940, and are accompanied by a prospectus clearly setting out all 

fees, both internal to the trusts and payable to financial intermediaries, among other 

information. They are generally sponsored by large investment managers, which are 

regulated as investment advisers under the Investment Advisers Act of 1940. While 

these unit investment trusts can be purchased in an agency transaction, there are 

several cost savings to retirement investors when they are purchased on a principal 

basis. 

Contract Requirements

We reiterate our prior concerns with the contract requirements described in the 

BIC Exemption Section above, most notably with respect to (1) re-contracting with 

existing clients, (2) execution of contract with financial advisors, and (3) the required 

warranties. We would also reiterate, that the requirement related to the timing of 

entering into the contract should be made consistent with the formulation used in 

Rule 206(3)-3T under the Investment Advisers Act of 1940 (the SEC’s Temporary Rule 

Regarding Principal Trades with Advisory Clients), which requires that a contract be 

entered into prior to executing the transaction.

Liquidity and Pricing

The proposed PT Exemption requires that the debt security (1) possess no 

greater than a moderate credit risk, and (2) be sufficiently liquid that it can be sold at 

or near its fair market value within a reasonably short period of time. By imposing 

these requirements, we believe that the Proposed Rule, is again, in effect imposing the 

Department’s investment judgment in the place of the investment judgment of 

experienced financial professionals that understand their client’s investment needs, 

market conditions, and available investment options. It may well be that clients 

choose to purchase high yield securities or are prepared to give up liquidity in a 

retirement account where they may not need liquidity for 25 years. We would urge the 

Department to re-evaluate the imposition of these standards given the overarching 

impartial conduct standards that the financial professional and the firm will otherwise 

be held to under the PT Exemption. 
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VI. CONCLUSION

We believe that the Department substantially underestimates the magnitude of 

the changes that these proposals, if adopted, will cause in the retirement marketplace 

as well as the resulting unintended and adverse consequences for retirement savers. 

We question whether the large disruptions and limitations built into the 

implementation of and operations under the BIC Exemption and PT Exemption will 

outweigh any reduction of the potential harms that the Department states it is trying 

to address and believe that a more effective approach would (1) build upon the 

extensive investor protections contained in current laws and regulations, and (2) 

establish a clearly defined best-interest standard of care applicable to all financial 

service professionals across all types of accounts. Such a standard would be 

established in conjunction with the SEC and FINRA, and be premised on identification 

and management of conflicts, targeted fee and product risk disclosure, and effective 

management of compensation incentives to registered persons. 

The Proposed Rule should be re-evaluated and the Department should 

undertake to more fully understand the benefits, costs, and potential impact to 

retirement plans, retirement savers, and the financial markets. If, however, any final 

regulation is adopted based on the Proposed Rule, the effective date must be 

significantly delayed so that plans and service providers can adjust business practices 

that have developed over several decades. Such transformative changes cannot 

possibly be effected in less than a 36-month period.

Respectfully submitted,

John Taft

CEO, RBC Wealth Management – U.S.