_______________________________ 

Officers and Directors

President: Joseph C. Peiffer, LA Robert S. Banks, Jr., OR Scott C. Ilgenfritz, FL Angela H. Magary, MA 

EVP/President-Elect: Hugh D. Berkson, OH Jason Doss, GA William A. Jacobson, NY Peter J. Mougey, FL 

Secretary: Andrew Stoltmann, IL Samuel B. Edwards, TX Richard A. Lewins, TX Jeffrey R. Sonn, FL 

Treasurer: Marnie C. Lambert, OH Christopher J. Gray, NY Mark E. Maddox, IN Robin S. Ringo, Executive Director

PUBLIC INVESTORS ARBITRATION BAR ASSOCIATION 

2415 A Wilcox Drive | Norman, OK 73069 

Toll Free (888) 621-7484 | Fax (405) 360-2063 

www.piaba.org 

July 21, 2015

Employee Benefits Security Administration  

Office of Regulations and Interpretations

Attn:  Conflicts of Interest Rule

Room N‐5655

U.S. Department of Labor

200 Constitution Avenue NW

Washington, DC  20210

Re:   RIN 1210‐AB32: Definition of the Term “Fiduciary”; Conflict of Interest Rule –  

Retirement Investment Advice

    ZRIN 1210‐ZA25:  

 Proposed Best Interest Contract Exemption

 Proposed Class Exemption for Principal Transactions in Certain Debt Securities

between Investment Advice Fiduciaries and Employee Benefit Plans and IRAs

 Proposed Amendment to Prohibited Transaction Exemption (PTE) 75‐1, Part V,

Exemptions From Prohibitions Respecting Certain Classes of Transactions Involving

Employee Benefit Plans and Certain Broker‐Dealers, Reporting Dealers and Banks

 Proposed Amendment to and Proposed Partial Revocation of Prohibited

Transaction (PTE) 84‐24 for Certain Transactions Involving Insurance Agents and

Brokers, Pension Consultants, Insurance Companies and Investment Company

Principal Underwriters

 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  
Employee Benefits Security Administration  

July 21, 2015

Page 2

Public Investors Arbitration Bar Association 

2415 A Wilcox Drive Norman, OK 73069 Phone: (405) 360-8776 Fax: (405) 360-2063 

Toll Free: (888) 621-7484 Website: www.PIABA.org Email: piaba@piaba.org

 Respecting Certain Classes of Transactions Involving Employee Benefits Plans and

Certain Broker‐Dealers, Reporting Dealers and Banks

 Proposed Amendments to Class Exemptions 75‐1, 77‐4, 80‐83 and 83‐1

To Whom It May Concern:

I write on behalf of the Public Investors Arbitration Bar Association ("PIABA"), an

international bar association comprised of attorneys who represent investors in securities

arbitrations.  Since its formation in 1990, PIABA has promoted the interests of the public investor

in all securities and commodities arbitration forums, while also advocating for public education

regarding investment fraud and industry misconduct.  Our members and their clients have a

strong interest in rules which govern the conduct of those who provide advice to investors.  

The Department of Labor has solicited comment on whether it should replace its 1975

regulations with a new definition of fiduciary investment advice.  PIABA agrees that the new

definition is a better reflection of the broad scope of the statutory text and its purpose, and will

better protect investors from conflicts of interest, imprudence and disloyalty.  The Department of

Labor has issued a notice of proposed rulemaking as well as several proposed class exemptions,

and in connection therewith, solicits comment on each.   

This comment letter will primarily focus on the delivery of investment advice to retail

investors and those contemplating whether they should roll over their employer sponsored

retirement plans into IRAs.  Members of PIABA represent investors who have received flawed

investment advice from brokers, oftentimes in connection with their retirement accounts.  Our

members have seen firsthand the harm that has resulted from the current system.  Retirement

investors will continue to be harmed if the status quo is maintained.  The stories referenced in this

letter describe events that have happened to actual investors.  There are significant flaws in the

system that can only be eliminated through remedial action.  While PIABA agrees that investors

would benefit from greater protection in all of their investment accounts, including non‐

retirement accounts, retirement funds hold special significance and deserve special protection

immediately.     

When the Employee Retirement Income Security Act of 1974 (ERISA) was enacted, Congress

recognized that retirement savings deserved special protections.  Congress extended protections

to IRAs as well through the Internal Revenue Code of 1986 (the Code).  As individuals enter

retirement, it is critical that their nest eggs that they have spent their lifetime earning and building

are protected.  Both ERISA and the Code provided that certain individuals who provided advice to
Employee Benefits Security Administration  

July 21, 2015

Page 3

Public Investors Arbitration Bar Association 

2415 A Wilcox Drive Norman, OK 73069 Phone: (405) 360-8776 Fax: (405) 360-2063 

Toll Free: (888) 621-7484 Website: www.PIABA.org Email: piaba@piaba.org

retirement accounts would be considered fiduciaries.  If these individuals violated their fiduciary

duty to their customers, both ERISA and the Code established penalties, thereby providing some

level of protection for investors.  However, currently, many individuals who provide advice to

investors holding retirement accounts are not considered fiduciaries under ERISA and the Code,

leaving a large gap in investor protection.  Most importantly, many brokers are not deemed

fiduciaries by either ERISA or the Code.  The expanded definition of fiduciary under the proposed

rule would change that, thereby finally closing the investor protection gap that has existed for the

last few decades.   

Investment advice is typically provided to investors by two different types of financial

advisors:  investment advisers and brokers.  Each is subject to different regulatory regimes,

although there is some overlap in those who enforce the regulations.  Investment advisers are

subject to the Investment Advisers Act of 1940 (the “Advisers Act”) and the rules promulgated

thereunder as well as state statutes and regulations.  The Securities and Exchange Commission

(the “SEC”) and the state securities regulators enforce those statutes and regulations.  Brokers are

governed by the Securities Exchange Act of 1934 (the “Exchange Act”) and the rules enacted

thereunder as well as by state statutes and regulations.  In addition, brokers are regulated by the

Financial Industry Regulatory Authority (“FINRA”), a self‐regulatory organization and are subject to

the rules established by FINRA.   

Investment advisers must adhere to a fiduciary duty standard, which is derived from judicial

interpretations of the Advisers Act.  The fiduciary duty is defined by case law to include the duty of

loyalty and care, and the obligation to always put the client’s interests before and above the

investment adviser’s own interests when he interacts with a client.  Brokers, on the other hand,

must adhere to a suitability standard which is premised on a FINRA rule, and requires that a broker

have a reasonable basis for believing that a recommendation of a security or an investment

strategy is “suitable” for a client, based on the client’s investment profile.    It should be noted,

however, that a number of states impose a fiduciary duty upon brokers as a matter of common

law.  Thus, brokers are subject to the suitability standard and may also be subject to a fiduciary

standard depending on the state in which they are doing business and the nature of their

relationship.   

A retirement investor receiving investment advice could receive advice from someone who

owes them a fiduciary duty, or someone who only owes them the lesser suitability standard.  The

overwhelming majority of investors do not understand with whom they are doing business.   

Investors’ ability—or inability—to distinguish between investment advisers and brokers is

aggravated by the industry’s confusing use of titles like “Financial Advisor,” “Wealth Management
Employee Benefits Security Administration  

July 21, 2015

Page 4

Public Investors Arbitration Bar Association 

2415 A Wilcox Drive Norman, OK 73069 Phone: (405) 360-8776 Fax: (405) 360-2063 

Toll Free: (888) 621-7484 Website: www.PIABA.org Email: piaba@piaba.org

Specialist,” and “Vice‐President of Investments” for brokers.  In fact, there are so many various

professional designations available that FINRA has an entire section of its website devoted to

defining these designations.  The North American Securities Administrators Association (“NASAA”)

also recognized this as a problem and adopted a model rule prohibiting the misleading use of

senior and retiree designations to address concerns over particularly troubling designations.1

Although the brokerage industry argues that retirement investors understand the services

offered by investment professionals, and choose the individual and service that best suits their

needs, most investors don’t know the difference between brokers and investment advisors – and

the industry is well aware of that fact.  The simple truth is that more than three out of four

investors don’t understand that the current laws and rules impose different duties on brokers and

investment advisers, according to a 2010 survey conducted for the Consumer Federation of

America (CFA), AARP, the Investment Adviser Association, the Financial Planning Association, the

CFP Board, the North American Securities Administrators Association (NASAA), and the National

Association of Personal Financial Advisors.2

  More recently, a 2015 study confirmed that most

retail customers think their financial advisor – regardless of which type of advisor it is – is a

fiduciary.3

  The industry is well‐aware of the confusion.  In a survey open to all brokers, investment

advisers, and insurance consultants and producers, 97 percent of them said “investors don’t

understand the differences between brokers and investment advisers.”4

 

1 See “State Securities Regulators Announce New Model Rule on the Use of Senior Certifications and

Professional Designations,” NASAA, April 1, 2008, available at http://www.nasaa.org/5685/state‐securities‐

regulators‐announce‐new‐model‐rule‐on‐the‐use‐of‐senior‐certifications‐and‐professional‐designations/.   2 See Infogroup/ORC, “U.S. Investors & The Fiduciary Standard:  A National Opinion Survey,” September 15,

2010, available at http://www.cfp.net/docs/public‐policy/us_investors_opinion_survey_2010‐09‐

16.pdf?sfvrsn=2.   3 See Spectrem Group, “Fiduciary – Do Investors Know What It Means,” 2015, available at

http://349ab54c3b58919c6638‐

ff70f51d4942f2bbd11ba0e41cfec577.r51.cf2.rackcdn.com/Fiduciary%20Whitepaper.pdf    4 See “Trustworthy Advice and Individual Investors: Will Regulators Act in Investors’ Best Interest?” issued in

August 2013 to report the findings of the 2013 fi360‐ThinkAdvisor Fiduciary Survey, available at

http://www.fi360.com/uploads/media/fiduciarysurvey_resultsreport_2013.pdf; see also “Seeking

Trustworthy Advice for Individual Investors – Financial Intermediaries Indicate Strong Support for Fiduciary

Standard” issued in February 2015 to report the findings of the 2015 fi360 Fiduciary Standard Survey,

available at http://www.fi360.com/uploads/media/2015fiduciarysurvey.pdf; and “Fiduciary Duty and

Investment Advice: Attitudes of 401(k) and 403(b) Participants,” a report published by the AARP in

September 2013 (majority of participants concerned investment advice by plan providers not held to

fiduciary standard).  All related documents available at
Employee Benefits Security Administration  

July 21, 2015

Page 5

Public Investors Arbitration Bar Association 

2415 A Wilcox Drive Norman, OK 73069 Phone: (405) 360-8776 Fax: (405) 360-2063 

Toll Free: (888) 621-7484 Website: www.PIABA.org Email: piaba@piaba.org

This confusion leads to investors seeking advice from individuals who they mistakenly

believe are looking out for their best interests.  The current system cannot continue as it is and

adequately protect retirement investors.  Investors suffer billions of dollars in losses each year due

to conflicted financial advice.  Every day, retirement investors receive conflicted advice which is

not in their best interests which frequently leads to a drag on returns in their accounts, or a

decline in their account value.  Below is a story from investors who had to file a FINRA arbitration

to recover their losses.   

 William, an 80 year old retired plumber, and his wife, Elizabeth, were long standing

members of Nativity Parish in Overland Park, Kansas.  They met their broker, Charles,

at their church, where he was also a member.  The broker Charles recommended that

the couple invest in a closed end mutual fund, which was a proprietary product of the

brokerage firm that employed Charles.  He invested William’s IRA in the fund and

almost all of Elizabeth’s trust account.  This was the couple’s retirement savings

which represented a lifetime or work and frugality.  Charles earned a substantial

commission by choosing this particular product because the mutual fund was a

proprietary product of the brokerage firm.  As a result of his conflicted advice

regarding this investment, the couple lost a substantial amount of their retirement

savings, $50,000 in a little over a year, money they did not have time to re‐earn at

that late stage of their lives.  Since Charles was only a broker, he did not owe William

and Elizabeth a fiduciary duty.  His only obligation was to follow FINRA’s suitability

standard.  He justified his recommendation to invest the majority of the couple’s

retirement savings into the mutual fund by saying it was a suitable investment, and

that fact that Charles was financially incentivized to choose this particular investment

over others was irrelevant.   

The failure to impose a strong national fiduciary duty is costing the American public billions

of dollars.  As the group SaveOurRetirement.com has noted:  “Every single day that passes without

a strong fiduciary duty means between $57 million and $117 million of retirement savers’ hard‐

earned money is lost due to conflicted investment advice, amounting to at least $21 billion

annually.  These are real financial hardships and they militate against any further delay in the

 

http://www.aarp.org/research/topics/economics/info‐2014/fiduciary‐duty‐and‐investment‐advice‐‐‐

attitudes‐of‐401‐k‐‐and‐4.html.
Employee Benefits Security Administration  

July 21, 2015

Page 6

Public Investors Arbitration Bar Association 

2415 A Wilcox Drive Norman, OK 73069 Phone: (405) 360-8776 Fax: (405) 360-2063 

Toll Free: (888) 621-7484 Website: www.PIABA.org Email: piaba@piaba.org

rulemaking process.”5  The current regulatory regime allows brokers to put their own interests

above those of their clients.  According to a February 2015 report by the Council of Economic

Advisers entitled, “The Effects of Conflicted Investment Advice on Retirement Savings,” Americans

are actually suffering $17 billion in losses annually due to conflicted advice they receive from

financial advisors under the existing regulatory system.6

It is necessary that this rule proposal be enacted to protect retirement investors.  PIABA

supports the scope of the proposal to cover all retirement accounts, advice directed towards IRAs

and rollovers.  Below we will discuss the Best Interest Contract Exemption and why this is

necessary to replace the current suitability standard.

Best Interest Contract Exemption

The Best Interest Contract Exemption allows brokers to engage in what would otherwise be

prohibited transactions so long as they enter into a contract with retirement investors and agree

to certain parameters on the relationship which are intended to protect these investors.  PIABA

supports the best interest contract exemption.  Most importantly, the contract would require

brokers to acknowledge their fiduciary status under either ERISA or the Code with respect to any

recommendation to a retirement investor to purchase, sell or hold an asset.  As discussed above, it

is often confusing for investors to fully understand a broker’s obligation because of the various

regulatory schemes under which financial advisors operate and the confusing titles used.  The Best

Interest Contract Exemption would eliminate any confusion and make the obligation clear to both

the broker and the investor.

PIABA is supportive of the disclosures the exemption requires.  Oftentimes, retirement

investors are given advice to invest their retirement savings in products that are complex, and that

they cannot possibly understand.  The brokers will oftentimes tell their customers that there are

no fees associated with the investment simply because the customers have not been charged a

commission.  However, the brokers fail to disclose to their customers the fact that while they may

not receive a commission, they are still being compensated by the issuer for selling the

 

5 See http://saveourretirement.com/cms/wp‐content/uploads/2015/02/DOL‐SOR‐Letter‐Comment‐Period‐

Request‐5‐8‐15.pdf.   6 See https://www.whitehouse.gov/sites/default/files/docs/cea_coi_report_final.pdf.  “Conflicted advice”

refers to

advice given on particular investment products where the financial advisor is compensated in fees and

commissions that depend on which investment product the customers buys.
Employee Benefits Security Administration  

July 21, 2015

Page 7

Public Investors Arbitration Bar Association 

2415 A Wilcox Drive Norman, OK 73069 Phone: (405) 360-8776 Fax: (405) 360-2063 

Toll Free: (888) 621-7484 Website: www.PIABA.org Email: piaba@piaba.org

investment.  The customers do not understand that there are conflicts of interest impacting the

brokers’ recommendation that do not align with the customers’ interests.

A popular product that is sold in this manner is variable annuities.  FINRA has questioned

the appropriateness of placing a variable annuity in an IRA, yet brokers regularly recommend that

investors purchase annuities in their IRAs, usually because the broker will earn a substantial

payment from the annuity company.7

  Brokers defend their recommendations, claiming they are

“suitable” for investors because of some benefit the annuity offers, such as a death benefit or

future income benefit.  Yet, the annuities will often have high internal fees and a substantial

penalty if money is withdrawn early.   

 Robert was a 70 year old retired business owner suffering from Parkinson’s disease,

living in Missouri.  From 2005 until 2010, Robert’s broker Mitch managed his

substantial retirement savings, including Robert’s IRA.  Mitch recommended that

Robert purchase a variable annuity in the amount of $330,000 in his IRA.  The broker

also sold Robert another variable annuity in the amount of $1,000,000 in his trust

account.  Mitch failed to explain the fees associated with the annuities, failed to

explain how it would be invested in the sub‐accounts, and failed to disclose how he

would be generously compensated for selling the annuity.  Eventually, Robert sought

the advice of an investment adviser who explained to Robert what he was invested

in.  At that point, Robert was unable to cancel these investments without incurring

substantial penalties.  As a result, his money remained inaccessible.  Unfortunately,

at that point, it was too late to undo the damage Mitch had done.   

Mitch attempted to justify his recommendations of variable annuities, claiming the investments

met FINRA’s suitability standard.  While it is arguable whether these investments met that

standard, under such a standard, it does not matter if there are better or optimal investments

available.   

PIABA also supports the restrictions on the types of securities that may be sold to investors

under this exemption.  Brokers often recommend complex securities in customers’ retirement

 

7 See “Variable Annuities: Beyond the Hard Sell”, available at http://www.finra.org/investors/alerts/variable‐

annuities‐beyond‐hard‐sell, (“Investing in a variable annuity within a tax‐deferred account, such as an

individual retirement account (IRA) may not be a good idea. Since IRAs are already tax‐advantaged, a

variable annuity will provide no additional tax savings. It will, however, increase the expense of the IRA,

while generating fees and commissions for the broker or salesperson.”).
Employee Benefits Security Administration  

July 21, 2015

Page 8

Public Investors Arbitration Bar Association 

2415 A Wilcox Drive Norman, OK 73069 Phone: (405) 360-8776 Fax: (405) 360-2063 

Toll Free: (888) 621-7484 Website: www.PIABA.org Email: piaba@piaba.org

accounts that generate income.  Again, brokers attempt to justify the recommendation by ignoring

the complexity of the investments and the customers’ ability to understand the investments and

instead focus on whether there is any colorable claim to be made for arguing whether the

investment met the customers’ stated investment objectives.

 One such example is Mabel, a 75 year old retiree living in Florida.  She retired in 2006

from a bank, where she had worked for 25 years in an administrative capacity.  She

met her broker, John, who had a desk at the bank, although he worked for a separate

brokerage firm.  Mabel rolled her employment retirement plan, almost $280,000,

into an IRA with John.  Initially, the broker purchased three separate, Class A mutual

funds with 90% of Mabel’s retirement funds.  Within a year, the broker

recommended that Mabel sell some of the mutual funds and invest approximately a

third of the account in structured securities.  When those securities matured, the

broker purchased reverse convertible securities.  Within only a matter of months,

Mabel lost a third of her retirement account.  The broker, John, justified the

purchases under the suitability rule, ignoring Mabel’s lack of understanding of the

products.   

The need for income is an important one for a retiree.  They have usually lost the ability to

earn income and must rely on their investments to generate income to offset the spending down

of their savings.  When an investor has identified the goal of having their retirement funds provide

for their day to day expenses for the rest of their life, they turn to their broker to determine the

best way to make that happen.  Brokers may overlook the underlying risk to principal inherent in

the security and focus instead on the income generated by the investment.  Too many times,

investors report to our members that there is little or no discussion of the other relevant aspects

of the investment such as the liquidity, surrender or penalty charges, and the internal fees.  

However, the investor may have unforeseen long term care or other medical expenses and require

access to his or her retirement funds.  This short‐sighted focus on income harms the investor in

the longer term.  Additionally, there is often no discussion of the compensation to the broker, or

the brokerage firm’s association with the issuer of the security.   

PIABA supports the exclusion of specific types of securities within the exemption for several

reasons.  The exemption would prohibit the sale of non‐traded real estate investment trusts

(“REITs”) and private placements.  There have been well publicized problems with investments in

non‐traded REITs and private placements in recent years, and brokers’ recommendations of REITs

to retirees have caused significant problems for investors.  There have been a number of
Employee Benefits Security Administration  

July 21, 2015

Page 9

Public Investors Arbitration Bar Association 

2415 A Wilcox Drive Norman, OK 73069 Phone: (405) 360-8776 Fax: (405) 360-2063 

Toll Free: (888) 621-7484 Website: www.PIABA.org Email: piaba@piaba.org

disciplinary actions against brokerage firms by FINRA related to their sales practices of both REITs

and private placements:

 In 2014, FINRA fined Berthel Fisher & Company Financial Services, Inc. and its affiliate,

Securities Management & Research, Inc., a combined $775,000 for supervisory deficiencies,

including Berthel Fisher's failure to supervise the sale of non‐traded REITs.8

 In 2012, FINRA ordered David Lerner Associates, Inc. (DLA) to pay approximately $12 million

in restitution to affected customers who purchased shares in the Apple REIT Ten, a non‐

traded $2 billion REIT that DLA sold.9

 In early 2015, FINRA ordered Brookville Capital Partners LLC to pay full restitution of more

than $1 million to the victims and fined the firm $500,000 for fraud in connection with the

sale of a private placement offering called Wilshire Capital Partners Group LLC.10

 In 2011, FINRA sanctioned a total of 10 firms and 17 individuals for selling interests in

several high‐risk private placements, including those issued by Provident Royalties, LLC,

Medical Capital Holdings, Inc. and DBSI, Inc., which ultimately failed, causing significant

investor losses.11

It is important that these products not be sold to unsuspecting retirement investors who

believe their money is being invested appropriately and in their best interests.

 Kristen is 61 years old and lives in Colorado.  In 2007, Kristen’s husband passed away.  

She inherited her late husband’s retirement account and turned to Robert, a broker,

whom she trusted would help her through this difficult time.  He invested Kristen’s

retirement nest egg, which had over $600,000 in assets, in mutual funds which his

firm had a relationship with, in a number of non‐traded REITs, and into several

private placements.  In addition to the firm’s relationships with the mutual funds, the

 

8 See http://www.finra.org/newsroom/2014/finra‐fines‐berthel‐fisher‐and‐affiliate‐securities‐management‐

research‐775000.   9 See http://www.finra.org/newsroom/2012/finra‐sanctions‐david‐lerner‐associates‐14‐million‐unfair‐

practices‐sale‐apple‐reit.   10 See http://www.finra.org/newsroom/2015/finra‐sanctions‐brookville‐capital‐partners‐15‐million‐and‐

bars‐president‐anthony.   11 See http://www.finra.org/newsroom/2011/finra‐sanctions‐eight‐firms‐and‐10‐individuals‐selling‐

interests‐troubled‐private and http://www.finra.org/newsroom/2011/finra‐sanctions‐two‐firms‐and‐seven‐

individuals‐selling‐private‐placements‐without.  
Employee Benefits Security Administration  

July 21, 2015

Page 10

Public Investors Arbitration Bar Association 

2415 A Wilcox Drive Norman, OK 73069 Phone: (405) 360-8776 Fax: (405) 360-2063 

Toll Free: (888) 621-7484 Website: www.PIABA.org Email: piaba@piaba.org

brokerage firm was also involved in the offering of at least two of the private

placements.  Robert never disclosed to Kristen his or his firm’s financial incentives in

choosing the investments he did.  Instead, his supposed focus was on Kristen’s

investment needs.  In 2014, Kristen transferred her account away from the broker;

however she is still unable to sell many of the investments because they are illiquid.   

 Al also ended up investing in a non‐traded REIT.  Al retired after working for 29 years

for the City of Redmond Parks Department in Washington.  He sought advice from

two brokers, Robert and Leslie, trusting that they would properly advise him on his

retirement.  They convinced him to roll his 401(k), in which he had accumulated over

$500,000, into an IRA.  Al’s wife also transferred her IRA to Bob and Leslie.  They

recommended that the couple invest their retirement savings into a variety of

complex investments, including several private placements and a non‐traded REIT.  Al

and his wife were never told that they could lose money.  The risks were never

explained to them.  They thought their money was safe and that they would receive

income from these accounts to support them in their retirement.  However, because

of the type of investments that brokers Bob and Leslie had chosen, Al and his wife

lost $350,000 of their retirement savings.

As described above, a number of private placements have turned out to be fraudulent,

completely wiping out the retirement savings of those who were invested.   

 Dayton is a broker in Kansas.  He sold a series of private placements, later discovered

to be ponzi schemes, to a number of investors throughout Kansas.   

 He recommended that Jerry and Glenda purchase $200,000 of the fraudulent

securities in their IRAs.  Both were retired, living primarily on social security.  

The couple had first met the broker in 2004 at a free dinner seminar he hosted.  

He impressed them with his strong Christian faith.   

 Another couple, Wayne and Laraine met Dayton in 2004 at a free lunch

seminar.  The following year, they attended a free dinner seminar that the

broker hosted alongside one of the issuers.  Wayne was a retired industrial

distributor and Laraine was an executive secretary.  They invested $235,000 of

their IRA money in the fraudulent private placements.   
Employee Benefits Security Administration  

July 21, 2015

Page 11

Public Investors Arbitration Bar Association 

2415 A Wilcox Drive Norman, OK 73069 Phone: (405) 360-8776 Fax: (405) 360-2063 

Toll Free: (888) 621-7484 Website: www.PIABA.org Email: piaba@piaba.org

 Ed and Rose met Dayton at a free dinner seminar in 2003.  Ed is a retired

dentist, working part time as a shuttle driver for a car dealer.  Ed and Rose

also live primarily on Social Security.  The broker invested a total of $140,000

of their IRAs in the fraudulent private placements.   

 Marvin and Delores met the broker at a free dinner seminar he hosted in 2003.

Several years later, in 2007, the broker invested Martin’s $25,000 IRA in the

fraudulent securities.   

Each of these customers trusted that Dayton was acting in their best interests and

managing their retirement money safely.  They all lost everything.  Both the broker

and his firm were highly compensated by the issuer of the fraudulent securities based

on the amount of securities they were able to sell.  This was a serious conflict of

interest which incentivized the broker to recommend the fraudulent securities to his

clients without overly scrutinizing the issuers.  As a result, the broker justified the

potential income the securities produced, and concentrated his clients in these

investments, while compensating himself and his firm handsomely at the same time.   

The exemption would prohibit other complex products as well.  This would protect an

unknown number of investors.   

 Nick was 91 years old, living off his savings in an assisted living facility in Missouri.  

Beginning in 2003, when he was 84 years old, and continuing throughout the

financial crisis, his broker purchased a number of Real Estate Mortgage Investment

Conduit (“REMIC”), CMOs.  At various times, the CMOs represented between 25% and

60% of Nick’s IRA.  Nick lost over a third of the value of these investments, without

ever even understanding what his broker had invested his retirement savings in or

the risks involved.   

In addition to complex products, the exemption would prohibit the sale of promissory

notes.  For a number of investors, promissory notes, while being touted as meeting their

retirement income needs, have ended up being scams.   

 Larry is 69 years old, lives in Missouri and suffers from Lou Gehrig’s disease or ALS.  

ALS is a progressive neurodegenerative disease that affects nerve cells in the brain

and the spinal cord. Eventually, the ability of the brain to initiate and control muscle

movement is lost.  In 1998, Larry retired from AT&T and rolled over his retirement
Employee Benefits Security Administration  

July 21, 2015

Page 12

Public Investors Arbitration Bar Association 

2415 A Wilcox Drive Norman, OK 73069 Phone: (405) 360-8776 Fax: (405) 360-2063 

Toll Free: (888) 621-7484 Website: www.PIABA.org Email: piaba@piaba.org

plan into an IRA.  For the next decade, the brokerage firm managed his retirement

account conservatively.  In 2010, his broker, Jimmy, called Larry and told him he had

an investment opportunity for his IRA.  He recommended that Larry invest

approximately half of his IRA, $100,000, in a promissory note that would pay 10%

interest in 60 days.  The broker represented the investment as completely safe, with a

high return.  Larry trusted Jimmy and did as he recommended.  However, the

promissory note failed and Larry’s investment was completely lost – half of Larry’s

retirement money was now gone.  Because the investment required Larry to

withdraw money from his IRA, Larry also incurred a significant tax liability, which he

could not pay.  Larry was left with only $90,000 in his IRA to sustain him through

retirement with a debilitating illness.   

 The broker, Jimmy, also advised other clients to invest their retirement savings in the

same promissory notes.  When Bonnie retired in 2007, Jimmy recommended she roll

over her pension into an IRA, which he would handle.  In 2010, Jimmy made the same

pitch to Bonnie that he made to Larry, recommending that she withdraw almost all of

the money in her IRA and invest it in a promissory note.  She followed Jimmy’s advice,

and withdrew $95,000.  She was reassured the money would be returned within 15

days.  Like Larry, Bonnie never received the money back, and she also suffered

significant tax liabilities.  Bonnie is still trying to find part time work, which has been

difficult.  She had worked seasonally for the IRS, but her unpaid tax liability caused

her to be formally reprimanded by the IRS.  Additionally, her credit has been affected

because of the precarious financial position she was placed in.   

There have been widespread repercussions from the sale of promissory notes that turned

out to be ponzi schemes.

 Bobby was a broker in New York who offered multiple services to his clients, including

tax preparation services, investment advice, and other services out of his one‐stop

shop.  Between 2003 and 2005, he recommended that a number of his clients invest

in a promissory note that was guaranteed to pay 9% in interest every year.  Many

agreed, believing that Bobby knew what was best for them, since he knew their full

financial picture and had prepared their taxes for many years.  Here are examples of
Employee Benefits Security Administration  

July 21, 2015

Page 13

Public Investors Arbitration Bar Association 

2415 A Wilcox Drive Norman, OK 73069 Phone: (405) 360-8776 Fax: (405) 360-2063 

Toll Free: (888) 621-7484 Website: www.PIABA.org Email: piaba@piaba.org

just some of the investors who took Bobby’s advice and decided to invest in this

particular promissory note:   

 Robert and his wife, both retirees, invested their life savings, including

$160,000 from Robert’s 401(k).  Irene invested her 401(k), valued at $24,000.  

Steve invested the full proceeds of his 401(k), rolling over $95,000.  Connie

rolled over her 401(k) valued at almost $200,000.  Larry invested his 401(k),

worth over $75,000.  Erin invested the $70,000 from her 401(k).  Several

clients cashed out their pension plans and invested them in the promissory

notes.  Johanna invested the entire proceeds of her pension plan.  Mary

invested just under a million dollars, representing a pension earned over a life

time working.  Edda, also retired, invested over $300,000 from the proceeds of

her pension.  Bobby also recommended the investment for IRAs.  He

recommended it to John, aged 74, who invested over $200,000 from his IRA in

the promissory note.  Cora, 75 years old, invested over $250,000 of her IRA in

the investment.  Erin invested $50,000 from her IRA in the promissory note.  In

the end, it turned out the investment was a ponzi scheme.   

Each person who invested lost everything.  Their entire retirement savings were gone with a

single investment.   

With the exception of variable annuities, each of the investments outlined above would not

have been permitted under the proposed Best Interest Contract Exemption.  These retirement

investors would have been protected if the exemption were in place.   

When it comes to fighting investor claims in arbitration, brokerage firms consistently

maintain that they have no obligation whatsoever to uphold anything resembling a fiduciary duty.  

“Suitability,” as defined by FINRA, is simply not the same as a fiduciary duty, as commonly defined

under the law.  When discussing the suitability rule, FINRA itself states:  “The requirement that a

broker’s recommendation must be consistent with the customer’s best interests does not obligate

a broker to recommend the ‘least expensive’ security or investment strategy (however ‘least

expensive’ may be quantified), as long as the recommendation is suitable and the broker is not

placing his or her interests ahead of the customer’s interests.”12

 

12 See FINRA Rule 2111 (Suitability) FAQ, available at http://www.finra.org/industry/faq‐finra‐rule‐2111‐

suitability‐faq.
Employee Benefits Security Administration  

July 21, 2015

Page 14

Public Investors Arbitration Bar Association 

2415 A Wilcox Drive Norman, OK 73069 Phone: (405) 360-8776 Fax: (405) 360-2063 

Toll Free: (888) 621-7484 Website: www.PIABA.org Email: piaba@piaba.org

This is hardly the sort of unambiguous guidance one would want for those handling

retirees’ life savings.  Perhaps the clearest evidence that a fiduciary duty places a stronger

obligation upon a broker is found when investors file claims in arbitration and the industry

unwaveringly denies the existence of a fiduciary duty.13  If the suitability and fiduciary standards

imposed roughly the same duties, then brokerage firms would not so strenuously deny in

arbitration that a fiduciary duty exists.  A clear contract which specifies what the broker’s duties

are would better protect investors than the current standard, and would hold brokers accountable

when something does go wrong.

To prevent the issues outlined above with respect to variable annuities, PIABA urges the

removal of variable annuities from the list of permissible investments available under the Best

Interest Contract Exemption.  There are inherent conflicts of interests associated with variable

annuities and, as FINRA itself has pointed out, a lack of a clear benefit derived from owning most

forms of a variable annuity within an IRA.

PIABA believes it is also important that the rule cover all retirement advice regardless of

how it is given, even when on a one time basis.  Occasionally, retirement investors will handle

their own accounts through discount brokerage firms, but still seek advice through the firm’s

telephone representatives.  When those representatives give investment advice, they should be

held to a fiduciary standard.   

 Philip, a retiree in Texas, had his IRA with an online brokerage firm.  He received a

lump sum retirement distribution, and rolled it into his IRA.  He sought advice about

what to do with the money once it was in his account.  In early February 2008,

Patrick, a phone representative with the brokerage firm, advised Philip to invest the

money, $1.1 million, in an auction rate security, because it was a safe, liquid

investment.  Unfortunately, at that time, the auction rate securities market had

begun to have problems, which was well known.  A week later, the auction markets

froze and Philip lost access to his retirement savings.  Two years later, Philip was still

 

13 See PIABA’s March 25, 2015 Report, “Major Investor Losses Due to Conflicted Advice: Brokerage Industry

Advertising Creates the Illusion of a Fiduciary Duty,” available at https://piaba.org/piaba‐newsroom/report‐

major‐investorlosses‐due‐conflicted‐advice‐brokerage‐industry‐advertising‐cre.  PIABA’s report gave

multiple examples of actual Answers filed in FINRA arbitrations with customers in which broker‐dealers

denied having a fiduciary duty, and even included one Answer that included an Affirmative Defense that the

firm’s duties to Claimants were limited to “transactional duties.”  In other words, the broker‐dealer

disavowed liability because it was only an order taker doing what the customer wanted.
Employee Benefits Security Administration  

July 21, 2015

Page 15

Public Investors Arbitration Bar Association 

2415 A Wilcox Drive Norman, OK 73069 Phone: (405) 360-8776 Fax: (405) 360-2063 

Toll Free: (888) 621-7484 Website: www.PIABA.org Email: piaba@piaba.org

trying to access his money.  Unfortunately, the telephone representative did not owe

Philip any duty to give him advice that would be in his best interests.   

It is important that the exemption takes the form of an enforceable contract and that the

broker’s obligation is clearly spelled out in the contract.  Prior to this rulemaking, brokers often

placed clauses in their contracts which required IRA investors to disclaim that they were relying on

the advice they received from their brokers when investing.  Although the brokers were making

recommendations to buy, sell or hold investments, and the investors were coming to the brokers

specifically for that advice, the brokers disclaimed any liability for the advice they gave because of

the contracts they had the clients sign.   

When clients sued their brokers in FINRA arbitration for poor investment advice, brokers

would point to the contracts to demonstrate that the investors agreed that they were not relying

on the brokers’ advice.  Moreover, brokerage firms regularly argue that there is no private right of

action for a violation of the FINRA suitability rule, claiming investors have no right of recovery

even if their brokers gave bad advice.  Further, in those states where brokers are already deemed

fiduciary under state common law, brokers regularly disclaim such obligations when investors seek

to hold them to such standards in arbitration and, as discussed above, claim that the highest

standard they can be held to is the suitability standard.   

A written contract will eliminate any ambiguity as to the brokers’ obligations to their

customers.  Moreover, the warranty to comply with all federal and state law regarding the

rendering of investment advice will prevent a broker from disclaiming any state law that would

apply.  PIABA also supports the ban on exculpatory provisions that would disclaim or otherwise

limit liability for a broker’s actions.   

The Best Interest Contract Exemption permits the inclusion of mandatory arbitration

clauses in the contracts.  While PIABA does not support this section of the rule proposal, PIABA

recognizes that brokerage firms will continue to be permitted to include such clauses in their other

brokerage account agreements with customers.  PIABA believes that all mandatory arbitration

clauses should be prohibited, but prefers that such an approach not be piecemeal.  PIABA does

support the ban on class action waivers.

Fiduciary Duty Carve‐Outs for Investor Education Information

PIABA has some concerns about the carve‐out to fiduciary investment advice for investor

education information.  While it is important that retirement investors receive adequate investor

education to make informed decisions about their retirements, to the extent the investor
Employee Benefits Security Administration  

July 21, 2015

Page 16

Public Investors Arbitration Bar Association 

2415 A Wilcox Drive Norman, OK 73069 Phone: (405) 360-8776 Fax: (405) 360-2063 

Toll Free: (888) 621-7484 Website: www.PIABA.org Email: piaba@piaba.org

education information is provided by a broker during a free lunch or free dinner seminar or is

provided on the premises of an employer, the carve‐out is problematic.  For years, NASAA, the SEC

and FINRA have discussed concerns with free lunch and free dinner seminars.  As discussed above,

broker Dayton met each of his clients at either a free dinner or free lunch seminar.  With respect

to rollover advice, brokers often make their introductions to their future clients at “educational”

seminars held on the premises of the companies.  They then follow up with their prospects, giving

them investment advice at the next meeting.  However, the seminar has already primed these

prospects for the broker’s advice – to either retire early and cash out their pension or to rollover

their 401(k) to an IRA handled by the broker.  

 Veit and his wife, Karen, live in California.  In 1994, Veit decided to retire early from

Pacific Bell when his job was relocated.  Veit attended a seminar held on Pacific Bell’s

premises by a broker, Marilyn.  Following that seminar, Marilyn convinced Veit to

take a lump sum distribution rather than the pension, and invest the money with her.  

She also convinced him to roll over his 401(k) into an IRA which she would then

manage.  She placed all of the money into a variable annuity. Four years later, Karen,

was faced with a similar choice, and once again, the broker convinced her to take a

lump sum distribution and invest the money with her.  Again, Marilyn convinced

Karen to also roll over her 401(k) into an IRA which Marilyn would also manage.  The

broker invested Karen’s retirement funds in two variable annuities.  The broker set up

each of the variable annuities with monthly distributions and led the couple to

believe they would receive income for life.  The advice to retire early and invest in the

variable annuities was riddled with conflicts of interest that were never disclosed –

that the annuities were issued by a company affiliated the brokerage firm; that

Marilyn received a large commission for selling the annuities; and that the couple

would have received greater income by taking the pensions rather than the lump sum

distributions.  By 2006, Veit’s account was completely depleted.  By 2007, Karen’s

accounts were completely depleted.  By 2011, the couple was bankrupt.   

 Another broker, Sharon, met with a number of Pacific Bell employees in California

who were offered early retirement.  Each employee was offered the option of a

defined benefit pension or a lump sum payout.  Two of the employees, Adela and

Lauro, first attended seminars given by the broker on Pacific Bell premises, and then

met with the broker at their homes.  The other employees, Karrell, William, Connie
Employee Benefits Security Administration  

July 21, 2015

Page 17

Public Investors Arbitration Bar Association 

2415 A Wilcox Drive Norman, OK 73069 Phone: (405) 360-8776 Fax: (405) 360-2063 

Toll Free: (888) 621-7484 Website: www.PIABA.org Email: piaba@piaba.org

and Philip all met with the broker at their homes as well.  Sharon told each one the

same thing – if they took the lump sum and invested with her, they would be able to

take money each month for the rest of their lives, and there would be money to leave

to their children or their estates.  In addition to investing the lump sum distributions,

Adela, Karrell, William and Connie each rolled over their 401(k)s to Sharon as well.  

Sharon invested all of their money into variable annuities.  The advice Sharon gave

each investor was conflicted – if the employees did not retire or if they chose to take

a pension rather than the lump sum pay‐out, the broker would not be paid.  She did

not disclose these conflicts nor did she disclose the risks inherent in the course she

recommended – the costs involved in the variable annuities; that the withdrawals she

advised each investor they could take would likely deplete the accounts and would

not be able to sustain their retirements; or that the principal of each account was at

risk.

If these investment seminars were not permitted, the brokers would not have established

the relationships which lead to conflicted advice.  These types of seminars are even more

dangerous than free lunch or free dinner seminars because the investors are not receiving an

invitation in the mail from a stranger.  They are being invited to the seminar by their employers, in

the breakroom or the company auditorium.  They believe the broker has been vetted by their

employer, is acting on behalf of their employer or has come at the invitation of their employer.  

They don’t understand they are walking into a sales pitch.  They begin the relationship with a level

of trust that would not otherwise exist.  When the broker is going over their options during the

seminar and explaining all of the ways to invest their retirement money, the broker doesn’t

explain that if they leave their money in the pension, the broker will not earn a commission.  The

broker doesn’t explain that the only way he or she makes any money is when an account is

opened and the 401(k) is rolled over into an IRA.  The broker only talks about all of the ways an

investor can earn money through various investments that it just so happens that his or her firm

sells.  These sales pitches should not be permitted under the rule and should explicitly be excluded

from the carve‐out for investment education information.   

Biased investor education may take other forms as well:

 William was a water technician for the Johnson County Water District in Kansas.  

After he retired, he invested his 457 Retirement Plan in an annuity.  After hearing a

broker, Dean, on his Saturday morning talk radio show discussing retirement, Will

requested a copy of a book discussed on the show.  At that point the broker started
Employee Benefits Security Administration  

July 21, 2015

Page 18

Public Investors Arbitration Bar Association 

2415 A Wilcox Drive Norman, OK 73069 Phone: (405) 360-8776 Fax: (405) 360-2063 

Toll Free: (888) 621-7484 Website: www.PIABA.org Email: piaba@piaba.org

an intense sales effort to convince Will to sell his annuity and roll over his IRA to the

broker so that he could manage it.  Dean said he would invest the money so that it

would grow by at least 6% each year.  Eventually Will did.  Dean rolled Will’s money

into a variable annuity, yet failed to disclose the many conflicts of interest he had.  He

failed to explain that by investing in a new variable annuity, Will was incurring new

surrender penalties.  Yet, had Will left the money where it was, Dean would not have

earned any commission.  Will now works part time for the Kansas Department of

Transportation because of the losses he suffered as a result of his broker’s investment

advice, which Will thought was in his best interests.   

Whenever investment education information is tied to a sales pitch or followed by a

recommendation by a broker, it should be covered by the definition of fiduciary investment

advice.   

Principal Transactions in Certain Debt Securities

PIABA support the exemption for principal transactions in certain debt securities.  PIABA also

supports the disclosure the proposal requires.  Investors do not currently receive adequate

information about debt securities.  FINRA recently issued a regulatory notice seeking comment on

additional disclosures it proposes to require on fixed income securities.  There have been a

number of disciplinary actions against firms by FINRA over the last few years concerning excessive

markups and markdowns of debt instruments:   

 In 2012, FINRA fined Citi International Financial Services LLC $600,000 and ordered

more than $648,000 in restitution and interest to more than 3,600 customers for

charging excessive markups and markdowns on corporate and agency bond

transactions.14   

 In 2013, FINRA fined StateTrust Investments, Inc. over $1 million for charging

excessive markups and markdowns in corporate bond transactions and ordered the

firm to pay more than $353,000 in restitution and interest to customers who received

 

14 See http://www.finra.org/newsroom/newsreleases/2012/p125821.  
Employee Benefits Security Administration  

July 21, 2015

Page 19

Public Investors Arbitration Bar Association 

2415 A Wilcox Drive Norman, OK 73069 Phone: (405) 360-8776 Fax: (405) 360-2063 

Toll Free: (888) 621-7484 Website: www.PIABA.org Email: piaba@piaba.org

unfair prices.  FINRA found that 85 of the transactions, in particular, operated as a

fraud or deceit upon the customers.15   

 Also in 2013, FINRA fined Morgan Stanley Smith Barney LLC and Morgan Stanley &

Co. LLC $1 million and ordered $188,000 in restitution plus interest for failing to

provide best execution in certain customer transactions involving corporate and

agency bonds, and failing to provide a fair and reasonable price in certain customer

transactions involving municipal bonds.16   

It is important that there be transparency in the bond markets where so little information is

available to investors.   

Ensuring Good Advice for Retirement Investors

Since this rule proposal was released, the brokerage industry has engaged in a campaign of

fear mongering, forecasting that advice and services will not be available for small accounts if

brokers are held to a fiduciary standard.  Not only is there no support for such a statement, the

evidence supports a contrary conclusion.

In 2013, the overwhelming majority of participants in the fi360‐ThinkAdvisor Fiduciary

Survey said that extending a fiduciary standard to brokers “would not price investors out of the

market for advice” and that “operating at a higher standard can save clients money over the

longterm.”17  Both academic researchers and the SEC have also concluded that investors’ access to

financial advisors and products will not be affected by a fiduciary duty rule.

A 2012 study conducted by Michael Finke, Ph.D. and Thomas Langdon considered the

availability of brokers and financial products in states that maintain strong fiduciary duties, limited

fiduciary duties, and no fiduciary duties and found:  “A sample of advisers in states that have

either a strict fiduciary standard or no fiduciary standard are asked whether they are constrained

in their ability to recommend products or serve lower‐wealth clients.  We find no statistical

differences between the two groups in the percentage of lower‐income and high‐wealth clients,

 

15 See http://www.finra.org/Newsroom/NewsReleases/2013/P288973.   16 See http://www.finra.org/Newsroom/NewsReleases/2013/P317817.   17 See, Findings of the 2013 fi360‐ThinkAdvisor Fiduciary Survey, supra note 4.  Specifically, 83 % of the fee

only, 72% of the fee/commission, and 66.67% of the commission‐only respondents agreed that a fiduciary

standard would not price investors out of the market for advice.
Employee Benefits Security Administration  

July 21, 2015

Page 20

Public Investors Arbitration Bar Association 

2415 A Wilcox Drive Norman, OK 73069 Phone: (405) 360-8776 Fax: (405) 360-2063 

Toll Free: (888) 621-7484 Website: www.PIABA.org Email: piaba@piaba.org

the ability to provide a broad range of products including those that provide commission

compensation, the ability to provide tailored advice, and the cost of compliance.”18

Likewise, the SEC found that, even if a fiduciary standard was adopted for brokers, retail

investors should “continue to have access to the various fee structures, account options, and types

of advice that investment advisers and broker‐dealers provide.”19  The SEC considered the issue of

whether a fiduciary standard would likely limit investors’ access to advice and products and found

that it could make the recommendation and still “assure that retail investors continue to have

access to various investment products and choice among compensation schemes to pay for

advice.”20  The brokerage industry has demonstrated that it can find a way to comply with needed

investor protection rules and also continue dealing with customers of all sizes.  The costs of

compliance associated with a fiduciary duty standard are not meaningfully different from those

associated with a mere suitability rule.  The Finke and Langdon study addressed this issue and

found that there is no statistically significant increase in compliance costs in states in which there

is a clear fiduciary standard and ones in which there is no fiduciary standard.21  Furthermore, the

SEC’s study found that it was possible for it to engage in rulemaking on the subject while

minimizing cost and disruption.22  The impact, if any, will be felt by those firm designed to

promote their own interests by offering a small menu of high‐cost options to investors.   

The Consumer Federation of America found: “While firms of all sizes will have to adjust

their business practices to comply with the rule, there is no valid basis for the claim that small

firms would be put out of business.  For small firms, the key to compliance will be the initial

selection of the product menu they offer to retirement savers to ensure that it comports with a

best interest standard.  Firms that already offer a mix of reasonably priced, high‐quality

investment options that allows for creation of a diversified portfolio should see relatively little

impact from the rule.  They would have to enter into a contract with clients, make best interest

 

18 See Michael Finke and Thomas P. Langdon, “The Impact of the Broker‐Dealer Fiduciary Standard on

Financial Advice,” March 9, 2012, available at

https://www.onefpa.org/journal/Pages/The%20Impact%20of%20the%20Broker‐

Dealer%20Fiduciary%20Standard%20on%20Financial%20Advice.aspx.   19 See “Staff Study Recommending a Uniform Fiduciary Standard for Conduct for Broker‐Dealers and

Investment

Advisers,” 2011, available at https://www.sec.gov/news/press/2011/2011‐20.htm. 20 Id.

21 See Finke and Langdon, supra note 18.

22 See “Staff Study Recommending a Uniform Fiduciary Standard for Conduct for Broker‐Dealers and

Investment

Advisers,” supra note 19.
Employee Benefits Security Administration 

July 21, 2015 

Page 21 

recommendations, and provide disclosures with regard to costs and conflicts, but their business 

could otherwise continue largely unchanged. Those whose business is built around the sale of a 

few high-cost, low-quality products will face a more significant change to come into compliance, 

but that is appropriate. Either the sponsors of the investment products they recommend will have 

to adjust their products to make them more competitive under a best interest standard, or the 

firm will have to consider changing its product mix or, in the case of high-cost products, rebating 

fees that don't meet the reasonableness standard. While firms are likely to see some increase in 

compliance cost, including the cost associated with new disclosures, investment advisers who 

serve the small saver market under a fiduciary standard have shown that it is possible to serve this 

market affordably."23 

Conclusion 

PIABA thanks the Department of Labor for the opportunity to comment on this important 

rulemaking. We are hopeful that this opportunity to protect investors will not pass without 

action. If we can offer any further information, please feel free to contact us. 

Very truly yours, 

L~tj)jJJ / 

Jrseph c. peif'::;jO 

PIABA, President 

23 See "DOL Delivers on its Promise: Conflict of Interest Rule Proposal Provides Needed Protections for 

Retirement Savers, Flexibility for Financial Firms," available at 

http://www.consumerfed.org/pdfs/1S0S07 DOL-revised rule QandA.pdf. 

Public Investors Arbitration Bar Association 

2415 A Wilcox Drive Norman, OK 73069 Phone: (405) 360-8776 Fax: (405) 360-2063 

Toll Free: (888) 621-7484 Website: www.PIABA.org Email: piaba@piaba.org