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:

On behalf of the 1.453 million credit union members we represent, the Missouri Credit Union 

Association (MCUA) appreciates the opportunity to comment regarding 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.

MCUA 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 members’ best interest. Credit unions offering investment 

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

retirement and planning for their future.

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 discourage the ability of credit unions, or other 

financial institutions, to provide these services. This is a particular concern for lower net-worth 

members who may have fewer chances to learn about retirement and savings plans.

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 there are typically arrangements with third party 

brokers that outline their duties and responsibilities. The third party offering retirement or IRA 
services in most situations will be responsible for their own compliance with applicable laws and 

compliance standards. The third party usually sells their products directly to members. Credit 

union employees who interface between credit union members and the third party are only 

involved in a minor way. We appreciate that the proposal is not intended to implicate someone

as a fiduciary merely by providing participants with information about a retirement plan or IRA 

distribution options. We suggest that the definition of “education” and the “education carve-out”

be refined so as not to discourage credit unions from providing retirement investment options.

MCUA understands that credit unions are required to conduct due diligence to ensure any third 

party practice has proper controls in place. Ensuring third party practices are compliant could 

cause the DOL proposed rule to be an additional compliance consideration. In addition, 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. If increased, class action exposure is coupled with a brokerdealer system that moves to an expensive fee for service model. Credit unions will need to 

determine whether it is in the best interest of the credit union and its members to engage in a 

broker-dealer relationship. Given the focus of credit unions – particularly on people of modest 

means and underserved niches, we hope that the market dislocations caused by this proposal 

will not undermine our mission of “people helping people.” 

Additionally, under other less common circumstances, MCUA has some concerns that credit 

unions could be directly swept into this rule. For example, credit unions could be substantially

affected when they 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 together an outside vendor of 

investment adviser services to its members or wholly or partly own a CUSO that provides 

investment adviser services.” 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 Create Ambiguity

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, 

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 such services. So, 

they likely will not be responsible for preparing and executing the contracts to meet this 

exemption. However, an overly prescriptive outline for allowing compensation in the rule could 

be burdensome for credit unions who may reevaluate broker-dealer relationships and internal

procedures. 

When a credit union has a sponsor that sells insurance and investment products through 

various subsidiaries, the credit union’s broker dealer could fall under 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. In this scenario, a credit union make a clear distinction that employees 

are not compensated for these referrals to avoid being considered an ERISA fiduciary.

Regulatory Overlap is Burdensome

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

could have the unintended consequence of reducing options for members of credit unions 

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

and the Consumer Financial Protection Bureau if they have $10 billion or more in assets, while

state-charted credit unions are regulated at the state level.

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 

middle 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 likely require expensive, and time consuming, compliance training for credit unions.

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 

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

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 heavy 

regulated financial entity. 

As always, we appreciate the opportunity to review this issue. We will be happy to respond to 

any questions regarding these comments.

Sincerely,

Don Cohenour

President