July 20, 2015

Office of Regulations and Interpretations

Office of Exemption Determinations

Employee Benefits Security Administration

U.S. Department of Labor

200 Constitution Avenue, NW, Room N-5655

Washington, DC 20210

Re: Proposed Definition of the Term “Fiduciary”; Conflict of Interest Rule—Retirement 

Investment Advice (RIN 1210-AB32); Proposed Best Interest Contract Exemption and 

Proposed Amendments to and Proposed Partial Revocation of PTEs 86-128 and 75-1 (ZRIN 

1210-ZA25)

Ladies and Gentlemen:

Invesco Ltd. (“Invesco”)1is pleased to have the opportunity to comment on the 

proposal published by the U.S. Department of Labor (“Department”) on April 20, 2015 

intended to redefine who is a “fiduciary” under the Employee Retirement Income Security 

Act of 1974, as amended (“ERISA”), and Section 4975 of the Internal Revenue Code of

1986, as amended (the “Code”) (the “Proposed Fiduciary Rule”).

2

Invesco also wishes to use 

this opportunity to comment on the proposed prohibited transaction class exemption (“PTE”) 

referred to as the Best Interest Contract Exemption (“BIC Exemption”) 3and the related 

proposed modifications to existing PTEs4(the “PTE Proposals”; and together with the “BIC 

Exemption,” the “Proposed Exemptions”; and together with the Proposed Fiduciary Rule, the 

“Proposals”). The term “Retirement Investors” hereinafter is intended to refer to employee 

 

1

Invesco is the parent company of various entities that are registered as investment advisers under the 

Investment Advisers Act of 1940, as amended (the “Advisers Act”). Certain of these entities are sponsors of and 

investment advisers to various investment companies registered as such under the Investment Company Act of 

1940, as amended (the “1940 Act”). Invesco also is the parent of Invesco Trust Company, a Texas trust 

company, which sponsors collective trust funds. Invesco is also the parent to Invesco Capital Markets, Inc., the 

sponsor of a family of unit investment trusts. 

2 Definition of the Term “Fiduciary”; Conflict of Interest Rule—Retirement Investment Advice (“Fiduciary Rule 

Notice”), 80 Fed. Reg. 21928 (April 20, 2015).

3 Proposed Best Interest Contract Exemption (“BIC Exemption Notice”), 80 Fed. Reg. 21960 (April 20, 2015).

4 Proposed Amendment to and Proposed Partial Revocation of Prohibited Transaction Exemption (PTE) 86-128 for 

Securities Transactions Involving Employee Benefit Plans and Broker-Dealers; Proposed Amendment to and 

Proposed Partial Revocation of PTE 75-1, Exemptions From Prohibitions Respecting Certain Classes of 

Transactions Involving Employee Benefits Plans and Certain Broker-Dealers, Reporting Dealers and Banks (“PTE 

Notice”) 80 Fed. Reg. 22021 (April 20, 2015).

1555 Peachtree Street NE

Atlanta, GA 30309

404 479 2945 direct

404 479 1095 main

404 724 4282 fax

Kevin M. Carome

Senior Managing Director 

and General Counsel
U.S. Department of Labor

July 20, 2015

Page 2

benefit plans, plan fiduciaries, plan participants or beneficiaries, individual retirement 

accounts (“IRAs”) and IRA owners collectively.

Invesco is a leading independent global investment manager with approximately 

$803 billion in assets as of June 30, 2015 managed through a wide range of investment 

strategies and vehicles, including open-end mutual funds, closed-end funds, institutional 

money market funds, exchange-traded funds (“ETFs”), collective trust funds (“CTFs”), 

separately managed accounts, real estate investment trusts (“REITs”) and unit investment 

trusts (“UITs”), all of which are vehicles through which Retirement Investors may invest. 

Invesco supports the application of a principles-based “best interest” standard for 

advice and recommendations provided to Retirement Investors by advisers5appropriately 

classified as ERISA investment advice fiduciaries. Invesco likewise supports a best interest 

contract exemption that would achieve the Department’s stated goal of preserving existing 

fee and compensation practices of advisers and financial intermediaries who become 

fiduciaries under the Proposed Fiduciary Rule while minimizing any harmful impact of 

potential conflicts of interest on the quality of advice provided to Retirement Investors. 

Invesco, however, believes that the Proposals in their current form are flawed in the 

following manner:

 The Proposed Fiduciary Rule casts too broad a net to apply fiduciary status to 

parties who should not have fiduciary status under ERISA;

 Aspects of both the Proposed Fiduciary Rule and the Exemptions (including the 

BIC Exemption) carry a level of complexity and ambiguity that make key 

elements (including the BIC Exemption) unworkable in practice;

 The Proposals inappropriately favor certain types of investment strategies, 

investment products and investment vehicles over others or create a structure 

that provides preferential access to a particular strategy, product or vehicle or 

groups of such strategies, products or vehicles; and

 The Proposals will result in a confused web of inconsistent regulatory 

requirements with respect to a Retirement Investor’s relationship with her 

financial adviser.

Invesco believes such flaws will result in unintended consequences that are harmful to 

Retirement Investors. These unintended consequences include inappropriate limits on the 

types of investment strategies, investment products and investment vehicles available to 

Retirement Investors, as well as inappropriate limits on sales activity, investment education

and, in certain cases, even the basic availability of advice to Retirement Investors. Invesco 

seeks with this comment letter (this “Comment Letter”) to advocate what we believe is a 

more balanced and workable approach to the implementation of the Department’s stated 

public policy goals. 

 

5 Consistent with the Department’s approach in the Proposed Fiduciary Rule, the term “adviser” shall not be limited 

to advisers registered under the Advisers Act but to representatives of any financial institution, such as banks, 

registered investment advisers, insurance companies or broker-dealers. Fiduciary Rule Notice, 80 Fed. Reg. 

21928.
U.S. Department of Labor

July 20, 2015

Page 3

In assessing the likely impact of the Proposals and alternative solutions to address 

the public policy concerns which underlie the Proposals, Invesco is guided by the following 

principles:

• Regulation of complex matters such as the fiduciary relationship between 

advisers and Retirement Investors should balance appropriate implementation of 

public policy objectives and commercially workable solutions that can function 

well in the marketplace;

 Regulation should not favor certain types of investment strategies, investment 

products or investment vehicles over others or create a structure that provides 

preferential access to a particular strategy, product or vehicle or groups of such 

strategies, products or vehicles;

• Advisers provide valuable advice to Retirement Investors and should be 

compensated fairly for the value of that advice; different compensation structures 

available in the marketplace can serve the needs of different groups of investors; 

regulation should permit a variety of compensation structures within the overall 

context of a workable best interest fiduciary standard;

• Regulation should not increase the risk that Retirement Investors or any 

particular demographic group of Retirement Investors will lose access or have 

reduced access to investment advice;

• Regulation should not increase the risk that Retirement Investors or any 

demographic group of Retirement Investors will receive less investment 

education and general investment information; and

• Regulators should avoid increased regulatory confusion and dissonance that will 

result from different regulatory outcomes for identical conduct depending upon 

the taxable nature of an investor’s account.

In addition to its own views expressed herein, as noted below, Invesco also wishes to 

endorse certain proposed changes to elements of the Proposals set forth in the comment 

letters being submitted to the Department by the Investment Company Institute (the “ICI”)

regarding the Definition of the Term Fiduciary; Conflict of Interest Rule—Retirement 

Investment Advice dated as of July 21, 2015 (the “ICI Fiduciary Rule Letter”) and regarding 

the Proposed Best Interest Contract Exemption (the “ICI BIC Letter”).
U.S. Department of Labor

July 20, 2015

Page 4

I. The Proposed Fiduciary Rule

A. Overview.

The Proposed Fiduciary Rule was designed to ensure that all advisers providing 

investment advice to Retirement Investors act as fiduciaries under ERISA and adhere to 

ERISA’s corresponding prohibited transaction rules. The Department points to the growth of 

participant-directed investment arrangements and IRAs since the passage of ERISA in 1974, 

and the Department’s desire to “better protect[s] plans, participants, beneficiaries, and IRA 

owners from conflicts of interest, imprudence, and disloyalty,”

6

as the primary drivers for 

this sweeping change from the current definition of fiduciary investment advice.

The Proposed Fiduciary Rule will expand what constitutes fiduciary investment advice 

and correspondingly expand the number and type of service providers that would be treated 

as fiduciaries under ERISA and the Code based upon their interactions with Retirement 

Investors. While Invesco understands the desire to subject a broader array of persons and 

courses of dealing to ERISA’s fiduciary standards, Invesco fears that the breadth of the 

Proposed Fiduciary Rule will impose fiduciary status on persons who cannot reasonably 

expect to have such status and will derail ordinary marketing and servicing efforts which are 

helpful to Retirement Investors but which never before have been considered by the adviser 

or the Retirement Investor to be fiduciary in nature. We believe that it is important to 

ensure that the Proposals do not increase the risk that any Retirement Investor loses access 

to these non-fiduciary courses of dealing and therefore in our comments seek clarity 

regarding activities that are and are not fiduciary investment advice.

B. Narrowing the Definition of Fiduciary Investment Advice.

The Proposed Fiduciary Rule identifies a person as an investment advice fiduciary if 

the person provides, for a fee or other direct or indirect compensation, investment or 

investment management recommendations or appraisals to a Retirement Investor or 

fiduciary, and either acknowledges the fiduciary nature of the advice, or acts pursuant to an 

agreement, arrangement, or understanding with the advice recipient that the advice is 

individualized to, or specifically directed to, the recipient for consideration in making 

investment or management decisions regarding plan assets.7 The term “recommendation” 

in the Proposed Rule is defined as “a communication that, based on its content, context and 

presentation, would reasonably be viewed as a suggestion that the advice recipient engage 

in or refrain from taking a particular course of action.”8 We note that the five-factor test 

under existing regulation that would require a mutual agreement between the adviser and 

the Retirement Investor of a fiduciary relationship would no longer exist. 

Invesco agrees with the Department that Retirement Investors should receive 

investment advice about products and services from advisers who are acting in the 

Retirement Investor’s best interests. Invesco believes, however, that the Proposed 

Fiduciary Rule casts too broad a net to apply fiduciary status to parties who should not have 

fiduciary status under ERISA. In order to bring certainty and clarity to what are important 

interactions, Retirement Investors and their advisers should have a clear understanding of 

when they are party to a fiduciary relationship. The definition of investment advice under 

 

6

Fiduciary Rule Notice, 80 Fed. Reg. 21928, 21929.

7

Fiduciary Rule Notice, 80 Fed. Reg. 21928, 21956-7.

8

Fiduciary Rule Notice, 80 Fed. Reg. 21928, 21960.
U.S. Department of Labor

July 20, 2015

Page 5

the Proposed Fiduciary Rule is so broad that it clouds this understanding. While we 

understand the Department’s concerns with the existing five-factor test, we believe that an 

appropriately crafted investment advice fiduciary rule should preserve the requirement that 

there be a mutual agreement between the adviser and the Retirement Investor that a 

fiduciary relationship exists. Invesco also believes that the Department, advisers and 

Retirement Investors would be well served if the Department further honed its definition of 

fiduciary investment advice so as to crystalize the types of interactions it believes should 

have fiduciary status. Without such clarification, the Proposed Fiduciary Rule seems to 

sweep in ordinary marketing or even client servicing efforts that should not be regarded as 

fiduciary in nature. While Invesco asks the Department to consider these general principles 

in recrafting the Proposed Fiduciary Rule, Invesco also proposes the following specific 

adjustments:

 Invesco can conceive of multiple forms of communication, much of which is mass 

produced, that it or its distribution partners share with Retirement Investors, 

such as a mutual fund or ETF fact sheet or general marketing material sent by 

hard copy or electronically to email addresses on file for Retirement Investors 

based upon any number of demographic screens. Marketing departments 

routinely direct materials to audiences based upon specific demographic 

information; however, without a personal interaction with the Retirement 

Investor to individualize the communication, Invesco is hard pressed to 

understand how those marketing efforts could be considered an appropriate 

foundation for a fiduciary relationship. Accordingly, Invesco urges the 

Department to narrow the definition of fiduciary investment advice so that it 

applies when a recommendation is simply “individualized to” the recipient as 

opposed to “specifically directed” or “individualized to” the advice recipient.

 We also respectfully request that the Department clarify that a product sponsor is 

not acting in a fiduciary capacity where the context makes it clear that the 

recommendation is limited to the party’s own products and services.

9

 For 

example, we assume that the Department did not contemplate responses to 

requests for proposals (“RFP”) as fiduciary investment advice. While RFP 

responses are typically “specifically directed” and “individualized” to the advice 

recipient, they are also clear sales pitches to which fiduciary responsibility should 

not attach. 

 Invesco asks the Department also to consider the so-called “daisy chain” of 

liability that seems to arise under the Proposed Fiduciary Rule when general 

marketing materials produced by product sponsors, such as Invesco, are 

distributed to Retirement Investors through such sponsor’s network of 

distribution partners. As currently drafted, a product sponsor could be deemed a 

fiduciary to a Retirement Investor with whom the product sponsor has no direct 

relationship or contact if its marketing materials are placed in the hands of a 

fiduciary to such Retirement Plan notwithstanding that the product sponsor does 

not know the identity or specific investment needs of the Retirement Investor. 

Tightening this definition to require the individualized contact seems necessary in 

 

9 The Department’s longstanding position has been that marketing one’s own products or services is not a fiduciary 

activity. See, e.g., 29 CFR § 2550.408b-2(f), example (1) (an investment adviser that markets its own services is 

not considered to be using its fiduciary authority, control, or responsibility to cause the plan to select and pay for 

such services). 
U.S. Department of Labor

July 20, 2015

Page 6

creating a balanced approach to defining fiduciary investment advice.

 The definition of fiduciary investment advice under the Proposed Fiduciary Rule 

would also seem to capture the types of client servicing efforts provided by 

mutual fund call centers. Call centers provide a host of services to Retirement 

Investors and through such discussions, may actually serve to promote the 

preservation of retirement assets. Invesco, like many similarly situated mutual 

fund sponsors, maintains a call center in its transfer agency. The representatives 

in the call center provide critical information to investors upon request, including 

information about how to complete administrative forms that allow the 

Retirement Investor or beneficiary to take a distribution, create an IRA, change a 

beneficiary, process a loan or establish a domestic relations order. These call 

center employees also assist Retirement Investors with questions about tax 

regulations and topics like required minimum distributions, eligibility for ERISA 

Solo 401(k) plan loans and loan processing, rollover procedures when a 

Retirement Investor has decided to leave an ERISA plan and tax code provisions 

concerning re-characterizations of contributions to small ERISA plans. The 

transfer agency staff is trained not to provide investment, legal, tax or 

accounting advice to callers. Invesco does not believe that the servicing 

described above is fiduciary investment advice or that such services are clouded 

by the conflicts that the Proposed Fiduciary Rule are intended to avoid. 

Accordingly, Invesco requests that the Department specifically exclude servicing 

provided by transfer agency call centers from the Proposed Fiduciary Rule.10

 Invesco, like many mutual fund sponsors, serves as the broker-dealer of record 

to a number of accounts previously serviced by a broker-dealer that has ended

its relationship with the account. In these cases, Invesco will provide ongoing 

services to the account and will collect ongoing Rule 12b-1 fees in consideration 

for the provision of these services. Invesco did not solicit this business and does 

not look to broaden such relationships. Invesco does, however, continue to 

answer day-to-day inquiries made by this “direct” retail shareholder base, many 

of whom are Retirement Investors. Invesco has made the decision over the 

years to retain these accounts in order that these typically small investors (often 

Retirement Investors) can maintain their accounts, as well as the ongoing 

servicing that Invesco delivers. Invesco requests that services to these accounts 

be excluded from the Proposed Fiduciary Rule. If the Department does not 

specifically exclude the services provided by mutual fund sponsors to these 

accounts from the definition of fiduciary investment advice, a mutual fund 

sponsor may have no choice but to no longer service these accounts so as not to 

subject the fees it earns to the requirements of the BIC Exemption or to the web 

of prohibited transaction rules. 

 

10 In connection with this request, Invesco acknowledges that any such exclusion should be subject to an obligation 

that the transfer agency call center service providers not provide investment, legal, tax or accounting advice. 

Absent an outright exclusion, Invesco requests clarity that the activities described above would not be deemed 

fiduciary investment advice so that transfer agencies can continue providing these helpful services without 

unnecessary concern that they will somehow trip into a fiduciary relationship. 
U.S. Department of Labor

July 20, 2015

Page 7

C. Carve-Outs.

The Department has rightfully crafted a number of carve-outs “for communications 

that the Department believes Congress did not intend to cover as fiduciary ‘investment 

advice’ and that parties would not ordinarily view as communications characterized by a 

relationship of trust or impartiality.”11 Invesco generally supports the Department in the 

character of these carve-outs; however, Invesco believes that a number of the carve-outs 

are too unnecessarily complex to be workable, or in the case of the Investment Education 

Carve-Out, too watered down to be beneficial. Invesco supports the more robust solutions 

with respect to the carve-outs set forth in the ICI Fiduciary Rule Letter. We also wish to 

highlight our specific concerns with the four carve-outs below.

1. The Counterparty Carve-Out. The Counterparty Carve-Out is intended to 

permit advisers to give incidental advice to ERISA plans deemed sophisticated 

enough to deal with an adviser at arms-length and differentiate between sales 

efforts and investment advice. The Counterparty Carve-Out matters particularly 

to advisers in their sales and servicing efforts, but is too unnecessarily complex 

to apply as written. We wish to focus on two areas of concern with the 

Counterparty Carve-out.

 The Counterparty Carve-Out should clarify that it applies to the sale of both 

investment vehicles and investment management services. This clarification 

particularly matters in the institutional asset management space where the 

investment advice given may be to hire a particular manager rather than to 

invest in a particular vehicle.

 We believe the Department can simplify its approach to ensure that a 

Retirement Investor is sufficiently sophisticated before an adviser can rely 

upon the Counterparty Carve-Out. The Counterparty Carve-Out uses two 

alternative conditions, each designed to ensure a sufficient level of 

sophistication. The first, that an ERISA plan has 100 or more participants, is 

an inadequate proxy for sophistication. The second, that an ERISA plan’s

assets are managed by an independent plan fiduciary that has at least $100 

million in employee benefit plan assets under management, is unduly 

restrictive, requiring a greater threshold of assets under management than 

the existing QPAM exemption.

12

 Moreover, to rely upon the Counterparty 

Carve-Out, an adviser must obtain a number of representations tied to its due 

diligence efforts in proving that the ERISA plan meets the required levels of 

sophistication. Invesco recommends that the Department simplify the 

Counterparty Carve-Out by indicating that all ERISA plans and any Retirement 

Investor represented by a QPAM meet the carve-out’s conditions concerning 

financial expertise. While the Department has expressed concerns that 

smaller participant directed plans are more like retail investors13 and 

therefore require added protections, the plan sponsors of smaller plans are 

subject to the same fiduciary standards as sponsors of large plans and we 

simply are not convinced that the plan sponsor of a smaller plan would lack 

 

11 Fiduciary Rule Notice, 80 Fed. Reg. 21928, 21941.

12 Note that PTE 84-14 only requires that a registered investment adviser have $85 million in assets under 

management in order to be a qualified professional asset manager. 

13 Fiduciary Rule Notice, 80 Fed. Reg. 21928, 21942.
U.S. Department of Labor

July 20, 2015

Page 8

the sophistication to distinguish between a sales effort and investment advice. 

We fear that without this change, smaller participant directed plans will lose 

access to advice and servicing.

2. The Investment Education Carve-Out. The Investment Education Carve-Out 

is intended to permit advisers to provide the following types of materials to 

Retirement Investors: plan information, general or conceptual financial or 

investment information, asset allocation models and interactive investment 

materials. Today, investment education is understood to be outside the definition 

of fiduciary investment advice and in 1996, the Department provided guidance in 

Interpretive Bulletin 96-1

14 to clarify that providers of asset allocation models and 

interactive investment materials that identify specific investment products do not 

become investment advice fiduciaries so long as the materials are accompanied 

by a statement that alternative investment options may be available. The 

Department expresses concern in the Fiduciary Rule Notice that current industry 

practices create a risk that these models will “effectively steer recipients to 

particular investments, but without adequate protections against potential 

abuse.”

15 We ask that the Department better explain its concern but until then 

are troubled that this new limitation imposed by the Investment Education CarveOut will mandate replacing what have been truly illustrative educational pieces

with those that will be far less useful to advisers and Retirement Investors.

3. The Financial Reports and Valuation Carve-Out. The Financial Reports and 

Valuation Carve-Out is intended to permit persons to provide statements of value 

to Retirement Investors in order to comply with regulatory reporting 

requirements. The Financial Reports and Valuation Carve-Out, however, is 

unnecessarily constrained in that, unless given to an employee stock ownership 

plan or to a pooled investment vehicle, statements of value are only carved-out 

from the definition of fiduciary investment advice if given “solely for purposes of 

compliance with the reporting and disclosure provisions”16 under Federal or state 

law, rule or regulation. We are unaware of any policy rationale that should 

prevent a product sponsor from providing information about the valuation of a 

pooled vehicle to a Retirement Investor upon request or in connection with a 

regularly provided statement, even if such statement is not required as a matter 

of law. Additionally, and of specific importance to Invesco in supporting its CTF 

clients, Invesco also requests that the Department remove from the Financial 

Report and Valuation Carve-Out the condition that a CTF maintain more than one

participating plan to qualify for the Financial Report and Valuation Carve-Out. In 

Invesco’s experience, there may be significant periods of time, in particular 

immediately following the launch of a CTF, where the trust has only one 

participating plan investor. Likewise, if an investing plan in a CTF redeems its 

assets, such trust may continue for a lengthy period of time with only one 

remaining plan investor. In both situations, Invesco employees and fund 

custodians will be providing valuation services to the single plan CTF. It is not in 

furtherance of the intent of the Proposed Fiduciary Rule to treat those Invesco 

employees as investment advice fiduciaries simply because the CTF has not as 

 

14 Interpretive Bulletin Relating to Participant Investment Education, 29 C.F.R. 2509.96-1 (June 11, 1996).

15 Fiduciary Rule Notice, 80 Fed. Reg. 21928, 21945.

16 Fiduciary Rule Notice, 80 Fed. Reg. 21928, 21958.
U.S. Department of Labor

July 20, 2015

Page 9

yet managed to attract other plans as investors or has had plans redeem their 

investment. 

4. The Execution of Securities Transactions Carve-Out. The Execution of 

Securities Transactions Carve-Out is intended to expand upon existing 

Department guidance that broker-dealers and banks can avoid being fiduciaries 

to Retirement Investors solely in their trade execution capacity. Invesco believes 

the Execution of Securities Transactions Carve-Out should be expanded to include 

securities transactions processed by mutual fund transfer agents. Mutual fund 

transfer agencies process transactions as requested by fund shareholders and the 

servicing agents supporting them. The transactions processed by a mutual fund 

transfer agent will not include the instructions required in §2510.3-21(d)(1)(ii)17

but are otherwise in line with the intent of this carve-out (as the transactions are 

not solicited and will be specific as to the number of fund shares or their dollar 

value).

II. The BIC Exemption

A. Overview.

The BIC Exemption was developed to promote the provision of investment advice 

that is in the best interest of retail Retirement Investors, such as plan participants and 

beneficiaries, IRA owners, and plan sponsors of small non-participant directed plans under 

ERISA (“BIC Investors”) while allowing investment advice fiduciaries to such BIC Investors 

to receive payments from third parties that would otherwise violate the prohibited 

transaction provisions of ERISA. Without a BIC Exemption, the impact of the Proposed 

Fiduciary Rule would be that advisers could no longer accept the types of fees and 

compensation that are generally accepted in the retail market, such as brokerage or 

insurance commissions, 12b-1 fees and revenue sharing payments. Invesco applauds the 

Department in recognizing the long-standing value of these “beneficial business models.”18

In providing comments on the BIC Exemption, Invesco will begin with its response to 

the Department’s specific questions about the virtue of a high quality/low fee exception to 

the BIC Exemption and to the Department’s limitation of the applicability of the BIC 

Exemption to covered “Assets” as defined in the BIC Exemption. Invesco strongly believes

that regulation should not favor certain types of investment strategies, investment products 

or investment vehicles and that any artificial constraint to the contrary will actually hamper 

an adviser in fulfilling her fiduciary obligations to serve the best interests of her clients. 

Invesco will then turn to the complexities of the BIC Exemption itself and propose certain 

refinements that we believe will be necessary in practical terms for advisers to rely upon the 

exemption. We have significant concerns that, as drafted, the BIC Exemption is too 

complex and advisers may conclude that they are better off abandoning their BIC Investor 

clients rather than risk running afoul of ERISA prohibited transaction rules.

 

17 Fiduciary Rule Notice, 80 Fed. Reg. 21928, 21959.

18 In proposing the BIC Exemption, the Department stated “[r]ather than create a set of highly prescriptive 

transaction-specific exemptions, which has generally been the regulatory approach to date, the proposed 

exemption would flexibly accommodate a wide range of current business practices, while minimizing the harmful 

impact of conflicts of interest on the quality of advice. The Department has sought to preserve beneficial 

business models by taking a standards-based approach that will broadly permit firms to continue to rely on 

common fee practices, as long as they are willing to adhere to basic standards aimed at ensuring that their 

advice is in the best interest of their customers.” BIC Exemption Notice, 80 Fed. Reg. 21960, 21961.
U.S. Department of Labor

July 20, 2015

Page 10

B. A high quality/low fee exception to the requirements of the BIC 

Exemption would constrain investment advice fiduciaries from acting in 

the best interest of their clients.

The Department requested comment, as part of the BIC Exemption Notice, on a 

possible streamlined prohibited transaction exemption that would include fewer conditions 

than the BIC Exemption if the adviser’s investment advice relates to high quality, low fee 

investments. Invesco believes the Department should not tilt the playing field toward or 

away from any particular type of retirement investment. Invesco believes that Retirement 

Investors are best served when they and their advisers are able to assemble a wellconstructed investment portfolio that is designed to meet the individual investment 

objectives, risk tolerances and time horizons of those Retirement Investors. In order to 

ensure that advisers and Retirement Investors are best positioned to be able to accomplish 

this goal, a full array of investment strategies, investment products and investment vehicles 

must be made available. We believe it is contrary to the interest of Retirement Investors 

and bad public policy to either limit the investment tools available to accomplish this task or 

establish a structure which creates incentives for advisers to avoid certain types of 

investments or products which may be best suited to help achieve a Retirement Investor’s 

investment objective, manage risk, mitigate the impact of market volatility over investment 

cycles and generally help achieve their desired outcome.

The cost of an investment is one factor among many which an investment advice 

fiduciary must consider in selecting investments that will best help achieve a Retirement 

Investor’s goals. Cost, however, should not be the dispositive factor. We believe that 

investment advice fiduciaries, operating under a best interest standard, must be permitted 

to assemble an investment portfolio which they believe will best achieve a Retirement 

Investor’s investment objective, within her risk tolerance and time horizon, without the 

imposition of artificial constraints on the exercise of their investment judgment, including 

constraints focused solely upon costs. Invesco believes that any structure that is created by 

regulation which would cause an investment advice fiduciary to disfavor certain investments 

solely upon the basis of their cost is imprudent and not consistent with the best interest of 

Retirement Investors.

To the extent that the Department is considering any high-quality low-fee 

streamlined exemption, it must provide a detailed rationale for the exemption, an example 

of the economic impacts of the exemption and an explanation of how the exemption would 

function. These elements are necessary when the Department engages in proposing a rule 

under the Administrative Procedure Act. The Department has not done so. 
U.S. Department of Labor

July 20, 2015

Page 11

C. Investment Advice Fiduciaries are better situated than the Department 

to select investment vehicles that are in the “best interest” of BIC 

Investors.

The Department has limited the types of investments for which an adviser may be 

compensated when relying on the BIC Exemption to the following: bank deposits, CDs, 

shares or interests in registered investment companies, bank collective funds, insurance 

company separate accounts, exchange-traded REITs, exchange-traded funds, publiclyoffered corporate bonds, agency debt securities, U.S. Treasury securities, insurance and 

annuity contracts (both securities and non-securities), guaranteed investment contracts, 

and equity securities that are publicly traded in the United States.

19

 The Department 

concluded that the list was sufficient to provide BIC Investors access to “the investments 

needed to build a basic diversified portfolio . . . while limiting the exemption to those 

investments that are relatively transparent and liquid [and] have a ready market price.”20

For the reasons stated in our response to the “high quality/low fee” inquiry, Invesco 

takes issue with a regulation that artificially constrains an investment advice fiduciary from 

having access to any tool that would be in the best interest of a BIC Investor. Invesco 

requests that the Department reconsider the limitations it has proposed in this regard and 

permit investment advice fiduciaries to rely on the BIC Exemption in connection with 

payments with respect to any securities or property. If however, the Department is 

unmoved by this view, Invesco respectfully requests that the Department at least correct a 

technical issue in the BIC Exemption that would result in UITs being excluded from 

coverage. Although UITs, as investment companies registered under the 1940 Act, would 

be included within the definition of “Asset” under the BIC Exemption, the BIC Exemption 

does not cover principal transactions. Fixed income UITs are generally sold in principal 

transactions and equity UITs are sold in “riskless principal” transactions. In a footnote in 

the preamble to the BIC Exemption, the Department indicates that it “does not view a 

riskless principal transaction involving mutual funds shares as an excluded principal 

transaction.”21 However, it is not clear whether the Department includes all types of 

registered investment companies, including UITs, in that statement. UITs are generally 

portfolios that buy securities hold them for a specific period of time. They are valued daily 

and otherwise subject to the same regulatory framework as mutual funds. Invesco requests 

that the Department revise the BIC Exemption to explicitly provide relief for compensation 

generated by recommendations related to “Assets” that consist of registered investment 

companies, such as UITs, that distribute units only on a principal basis.

D. Technical Concerns with the BIC Exemption.

Invesco has significant concerns that the ongoing monitoring, reporting, disclosures

and contractual obligations required by the BIC Exemption in their totality may discourage 

advisers from providing advice to BIC Investors at all. These include:

 Monitoring the number of participants in small defined benefit plans to ensure 

that the adviser can accept compensation under the BIC Exemption.

 

19 BIC Exemption Notice, 80 Fed. Reg. 21960, 21967.

20 BIC Exemption Notice, 80 Fed. Reg. 21960, 21967.

21 BIC Exemption Notice, 80 Fed. Reg. 21960, 21968. 
U.S. Department of Labor

July 20, 2015

Page 12

 Securing a written contract with the BIC Investor prior to making a 

recommendation.

 Delivering point of sale disclosure with respect to the recommended asset that 

includes the total cost of investing in the asset for a one-, five- and ten-year 

period, expressed as a dollar amount and assuming an investment of the dollar 

amount recommended by the adviser and “reasonable assumptions” about 

investment performance.

 Delivering annual disclosures that would include a list identifying each asset 

purchased or sold; the total dollar amount of all fees and expenses paid by the 

BIC Investor directly or indirectly with respect to each asset purchased and the 

total dollar amount of all compensation received by the adviser directly or 

indirectly from any party as a result of each asset sold.

 Maintaining a website on an ongoing basis that shows the direct and indirect 

“material compensation” payable to the adviser, financial institution and affiliates 

for services provided in connection with each asset or class of assets that a BIC 

Investor may purchase, hold or sell through the adviser or financial institution, 

and that a BIC Investor has purchased, sold or held during the previous 365 

days. This web disclosure must also include the source of the compensation and 

how the compensation varies within and among assets.

Invesco supports the Department’s effort to empower a BIC Investor to consider the 

costs she pays and the revenues her adviser receives in connection with the investments 

she makes. Invesco believes, however, that the Department accomplished these goals 

three years ago with its implementation of 29 C.F.R. § 2550.408b-2(c) (“Rule 408b-2”) and 

therefore would encourage the Department to incorporate these requirements into the BIC 

Exemption rather than create an entirely new disclosure regime for the BIC Exemption. The 

Department, together with the financial services industry, went through a robust and costly 

implementation process in connection with the development and finalization of Rule 408b-2. 

It would seem wasteful, confusing and unnecessary in reaching its desired outcome to 

require the same set of constituents to create a new system in support of the requirements 

of the BIC Exemption when the implementation of Rule 408b-2 was driven by this same 

intent. Moreover, Invesco does not believe that the litany of disclosures required will be 

helpful to BIC Investors given the volume and complexity of data embedded in these BIC 

Exemption disclosure requirements. 

The Department has additionally created a number of standards of care in the BIC 

Exemption that are quite vague and therefore will be difficult to implement, or may produce 

unintended and inappropriate consequences.

• The definition of “best interest” under the BIC Exemption goes further than the 

statutory fiduciary standard of care set forth under Section 404 of ERISA, which 

requires a fiduciary to act “solely in the interest of the participants . . . with the 

care, skill, prudence, and diligence under the circumstances then prevailing that 

a prudent man acting in a like capacity and familiar with such matters would use 

in the conduct of an enterprise of a like character and with like aims.”22 The 

definition of best interest under the BIC Exemption, however, would require the 

 

22 29 U.S. Code § 1104(a)(1).
U.S. Department of Labor

July 20, 2015

Page 13

adviser to commit contractually that it was additionally acting without regard to 

its own financial or other interests. We appreciate the Department is concerned 

that advisers not be improperly driven by their own financial interests in making 

recommendations to Retirement Investors but grafting this standard into the 

exemption is unnecessary: existing law already requires fiduciaries to avoid 

making decisions on the basis of one’s own financial or other interests.

23

 We 

therefore ask the Department to consider the impact of giving undue prominence 

to this factor within a BIC Exemption contract, which could unfairly expose 

advisers to speculative claims that their compensation is unreasonable. Advisers 

provide valuable advice to Retirement Investors and should be compensated

fairly for the value of that advice. Advisers should be able to receive and retain 

such compensation without undue risk of claims from the plaintiffs’ bar or others 

based on an unnecessary regulatory expansion of well understood, long-standing

legal principles. 

• The total amount of compensation to be received by the adviser may not exceed 

“reasonable compensation in relation to the total services they provide” to the 

BIC Investor. It is not clear how the Department intends to define “reasonable 

compensation;”

24 though Invesco recommends that the Department leverage its 

existing regulations under ERISA Section 408 to guide its reasonable 

compensation requirement under the BIC Exemption.25 Invesco also advocates 

that fees established pursuant to a comprehensive regulatory oversight regime, 

such as the regime that applies to open-end mutual funds, closed-end funds and 

ETFs, each of which has a robust process backed by the oversight of independent 

trustees, should be considered reasonable per se for purposes of the BIC 

Exemption.

• The adviser’s firm must warrant that it is not using any sort of program or action 

that “would tend” to encourage individual advisers to make recommendations 

that are not in the best interest of a BIC Investor. While the Department shies 

from identifying any particular required compensation or employment structures, 

it suggests that “certainly, one way for an [adviser’s firm] to comply is to adopt a 

‘level-fee’ structure, in which compensation for [a]dvisers does not vary based on 

the particular investment product recommended. The Department believes that 

the specific implementation of this requirement is best determined by the 

[adviser’s firm] in light of its particular circumstances and business models.”26 It 

is difficult to understand how an adviser’s firm would prevail against a challenge 

to its compensation structure that is anything short of a level-fee structure. As 

Invesco believes this is inconsistent with the Department’s stated objectives with 

respect to preserving existing compensation structures under the BIC Exemption, 

Invesco recommends that the Department identify in its final rule release other 

permitted payment structures so as to clarify that in fact, there are variable 

compensation practices that are acceptable. Invesco believes different 

 

23 As the Department notes in the Proposed BIC Exemption “both ERISA section 404(a)(1)(A) and the trust-law 

duty of loyalty require fiduciaries to put the interests of trust beneficiaries first, without regard to the fiduciaries' 

own self-interest.” BIC Exemption Notice, 80 Fed. Reg. 21960, 21970.

24 BIC Exemption Notice, 80 Fed. Reg. 21960, 21984.

25 In so doing, Invesco requests that the Department specifically identify what would qualify as a reasonable fee in 

connection with the sale of UITs, which do not afford advisers many of the sources of compensation allowed by

mutual funds but are sold with an upfront load and a series of scheduled deferred sales charges. 

26 BIC Exemption Notice, 80 Fed. Reg. 21960, 21971.
U.S. Department of Labor

July 20, 2015

Page 14

compensation structures available in the marketplace can serve the needs of 

different groups of investors; regulation should permit a variety of compensation 

structures within the overall context of a workable best interest fiduciary 

standard.

Invesco also supports the more precise recommendations identified in the ICI BIC 

Letter relating to the BIC Exemption. We emphasize our concern that Retirement Investors 

could be forced to invest without the benefit of advice if the requirements of the BIC 

Exemption are not moderated in a way that is workable for advisers. Advisers provide 

valuable advice to Retirement Investors, including BIC Investors, and should be 

compensated fairly for the value of that advice. The BIC Exemption was created to preserve 

the permissibility of these different compensation structures but then seems to swallow that 

intent with a set of requirements that are unnecessarily onerous, broad, and ultimately 

unworkable. We urge the Department to work with service providers to create a more 

balanced and workable BIC Exemption before promulgating its final rule, as we fear too 

many advisers will avoid providing advice to BIC Investors at all rather than subject 

themselves to the risk of excise tax penalties and lawsuits for even an inadvertent breach of 

these significant obligations.

III. The Prohibited Transaction Proposals

The PTE Proposals were crafted to further address the Department’s concerns 

identified in the Proposed Fiduciary Rule and align the impartial conduct standards set forth

in the BIC Exemption within certain PTEs. Invesco hereby requests that the Department 

consider Invesco’s comments to the Proposed Fiduciary Rule and the BIC Exemption in 

finalizing the PTE Proposals. 

Additionally, Invesco urges the Department to consider providing additional clarity 

regarding the applicability of Proposed Amendments to and Proposed Partial Revocation of 

PTEs 86-128 and 75-1 (the “Proposed PTE 86-128”).

27

 Under the “Mutual Fund 

Transactions Exemption” included in Proposed PTE 86-128, a fiduciary would be permitted, 

in certain instances, to act as principal in the sale of “mutual fund” (as defined in the PTE) 

shares to a Retirement Investor and receive a commission. In making this proposal, the 

Department noted that the described sales practice remains prevalent in the mutual fund 

industry and indicated that due to various factors relating to the nature of the transactions 

and mutual funds generally, a related PTE is appropriate. However, we believe the 

Department may not have contemplated that beyond mutual funds, many transactions in 

UITs meet the same objectives and criteria described and therefore merit coverage under 

Proposed PTE 86-128. As a general matter, UITs are sold at net asset value, often in the 

same manner and under the same circumstances that the Department intends Proposed PTE 

86-128 to cover for mutual fund transactions. Although differences between UITs and 

mutual funds certainly exist, we believe that their differences are immaterial to the 

Department’s stated analysis and primary concerns on this issue. As such, we believe that 

equal treatment is appropriate and that the Department should revise Proposed PTE 86-128 

to clearly include UIT transactions.

 

27 PTE Notice, 80 Fed. Reg. 22021.
U.S. Department of Labor

July 20, 2015

Page 15

IV. Regulatory Inconsistency

On a broader public policy level, Invesco urges the Department to step back from this effort 

and consult with its financial services regulatory partners regarding the benefits of a 

market-wide fiduciary standard. While we understand the Department believes there are 

conflicts that taint the provision of investment advice to Retirement Investors, the layering 

of inconsistent regulatory regimes within the same account will unnecessarily complicate the 

provision of advice or otherwise disrupt the provision of advice. Invesco urges the 

Department to consider that many individuals currently utilizing advisers hold both taxable 

and non-taxable accounts with the same adviser. While the Proposals will not apply to the 

provision of advice to the taxable accounts, an investment advice fiduciary may have no 

choice but to act in compliance with the Department’s regime in its relationship with the 

investor overall and this could encourage advisers to abandon their efforts to service the 

non-taxable accounts so as to avoid subjecting the entire relationship to the requirements of 

the Proposals.

V. Implementation Timeframe

The Proposals state that the final rule will be effective 60 days after publication in 

the Federal Register and the requirements of the final rule will become applicable eight

months after publication of the final rule.28 Invesco believes such a short implementation 

schedule will be inadequate in order to allow the financial services industry to adapt to the 

final rule (for example, to implement all of the documentation and systems revisions that 

the Proposals, and in particular the BIC Exemption, will require). Invesco therefore 

requests that the Department consider a longer implementation period, or, to the extent 

practicable, adopt a phased implementation schedule offering more time for complex 

operational details to be implemented. 

VI. Conclusion

As stated above, Invesco supports the application of a principles-based “best 

interest” standard for advice and recommendations provided to Retirement Investors by 

advisers appropriately classified as ERISA investment advice fiduciaries. Invesco likewise 

supports a best interest contract exemption that would achieve the Department’s stated 

goal of preserving existing fee and compensation practices of advisers and the financial 

intermediaries who have such fiduciary status while minimizing any harmful impact of 

potential conflicts of interest on the quality of advice provided to Retirement Investors. 

Invesco, however, believes that the Proposals in their current form are flawed in the 

manner described above and that such flaws will result in unintended consequences that are 

harmful to Retirement Investors. Invesco seeks with this Comment Letter to advocate what 

we believe is a more balanced and workable approach to the implementation of the 

Department’s stated public policy goals. 

 

28Fiduciary Rule Notice, 80 Fed. Reg. 21950.
U.S. Department of Labor

July 20, 2015

Page 16

Invesco thanks the Department for its consideration and hopes that our comments

assist the Department in assessing the impact of the Proposals on Retirement Investors. In 

further support of the Department’s stated goals, Invesco encourages the Department to 

continue working with industry leaders and its regulatory peers in reaching a more balanced 

approach in its final rule. 

Sincerely,

Invesco Ltd.

By:_________________

 Kevin M. Carome

 Senior Managing Director and General Counsel