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

Sept. 24, 2015

Office of Regulations and Interpretations

Employee Benefits Security Administration

Attn: Conflicts of Interest Rule, Room N-5655

U.S. Department of Labor

200 Constitution Avenue, N.W. 

Washington, D.C. 20210

Ladies and Gentlemen:

The Securities Industry and Financial Markets Association (“SIFMA”)1 is pleased to provide 

supplementary comments regarding the Department of Labor’s (“Department”) definition of 

fiduciary regulatory package. The industry appreciates the Department’s engagement during the 

hearing, as well as its thoughtful questions. 

At the hearing, Mr. Hauser asked me to address for the record whether, if the FINRA definition 

of the term “recommendation” were adopted, there would be a need for a seller’s exception. We 

believe the seller’s exception is critical to the rule, regardless of the definition of 

recommendation, and in fact, believe the two issues to be distinct and separate. The rule is so 

overbroad that it simply cannot be fixed with a precise definition of recommendation. Certain 

activities are not fiduciary in nature. Institutional traders, brokers, counterparties and clearing 

firms need certainty that regardless of their commentary, plans and their fiduciaries can agree 

that with adequate disclosure, one does not become a fiduciary inadvertently by providing one’s 

views about the market or about particular investments. The BIC Exemption will not become 

workable for broker-dealers merely because the definition of recommendation is clarified.

There was significant discussion at the hearings on mandatory arbitration. SIFMA firmly 

believes that unless mandatory arbitration continues to be permitted under the BIC exemption, 

the costs projected for the exemption will be even more significantly understated and the ability 

of broker-dealers to provide fiduciary services using the BIC exemption will be even more 

severely limited or the costs of such services increased dramatically to account for litigation risk. 

 1

 The Securities Industry and Financial Markets Association (SIFMA) brings together the shared interests of 

hundreds of securities firms, banks and asset managers. SIFMA's mission is to support a strong financial industry, 

investor opportunity, capital formation, job creation and economic growth, while building trust and confidence in 

the financial markets. SIFMA, with offices in New York and Washington, D.C., is the U.S. regional member of the 

Global Financial Markets Association (GFMA). For more information, visit www.sifma.org.
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We also do not believe that the Department has the authority to preclude arbitration, and note 

that mandatory arbitration was such a fundamental part of the proposal that its elimination would 

require reproposal.

There was significant comment on rollovers and distribution advice at the hearing and overall, 

we believe that there is a clear need to clarify the rollover rule to exclude information regarding 

required distributions, either because of the attainment of age 70 1⁄2 or due to beneficiary 

distribution rules in inherited IRAs. We simply do not believe that this very necessary 

information should ever be deemed to be investment advice. In addition, we believe that there is 

a consensus among witnesses that the Department’s proposal to permit no examples of specific 

funds will be a mistake for participants, and we urge the Department to work with consumer 

advocates and the industry to find a middle ground. Finally, we urge the Department to use 

FINRA Notice 13-45 as a safe harbor in this area.

We urge the Department to use the FINRA best interest standard, which requires that one put 

one’s client’s interests ahead of one’s own. The Department’s formulation instead – and in our 

view, mistakenly -- requires that one give advice “without regard” to one’s interest, which, in our 

view, is merely a trap to permit a plaintiff’s lawyer an avenue to argue that every time an 

investment could have paid the advisor “less”, its recommendation was not made “without 

regard” to the advisor’s interest. 

In addition, we reiterate that the Department’s choice to make prudence and best interest a 

requirement of an exemption is duplicative, unnecessary and contrary to the clear statutory 

language of ERISA with respect to plans covered under ERISA, which are already subject to 

section 404 of ERISA with recourse to federal court for violations of that standard. With respect 

to IRAs, we understand the Department’s interest in “finding a place” in the Code for a best 

interest standard for IRAs, but we believe that the remedies for violations of the prohibited 

transaction rules – reversal of the trade, disgorgement of fees, and payment of an annual 15% 

excise tax on the amount involved, regardless of a loss on the trade -- are flatly inconsistent with 

imposing ERISA remedies for the same violation.

Finally, if the Department chooses to proceed to a final rule, it must work with the industry on 

reasonable transition rules and effective dates. The systems that every broker-dealer will need to 

create, back test, and put into use will take years, not months to build. Both the point of sale and 

annual disclosure rules under the BIC exemption will require the creation of systems that accrue 

internal mutual fund fees daily to convert those fees to dollars amounts for the precise number of 

days that fund shares are held. It will also require the allocation of flat dollar revenue sharing to 

each share of every mutual fund sponsored by the fund company across all the firm clients 

holding such shares on a daily basis, a system that no broker dealer currently is required to do for 

any purpose. The planning and programming for these systems cannot even begin until the rules 

are finalized. In addition, every broker’s compensation, every incentive and bonus program, 

every performance evaluation will need to be revised or renegotiated under the new rules. The 
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overwhelming majority of accounts will need new advisory agreements, with new fees and client 

signatures.2 In the IRA world alone, that equates to the redocumentation of more than 50 million 

accounts. Finally, as we have said, numerous small accounts will have to be terminated. These 

accounts are likely the smallest and least sophisticated of our accounts, and the disruption and 

confusion inherent in this change should not be underestimated, in terms of negative client 

experience and the time necessary to make these transitions. 

We have attached a marked version of the rule, suggesting language changes that we believe will 

clarify it. We have not attempted to provide markups for the exemptions but we would be happy 

to continue to discuss necessary changes to these exemptions. 

We also reiterate our view that in light of the number of substantive comments received, the 

many changes that even supporters have suggested, and the many changes that are needed to 

make the rule work, the Department should re-propose the rule and prohibited transaction 

exemptions before adopting them in final form. 

Please do not hesitate to reach out to Lisa Bleier at 202-962-7329 if you have further questions. 

Sincerely,

Kenneth Bentsen

 2 We understand that the Department believes that one can agree to be an investment advice fiduciary without a 

written bilateral agreement and delivery of an ADV. The vast majority of securities lawyers who advise our 

industry disagree, and have advised our members that they will need to convert brokerage account agreements to 

advisory agreements. 
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SUBCHAPTER A--GENERAL

PART 2509--INTERPRETIVE BULLETINS RELATING TO THE EMPLOYEE 

RETIREMENT INCOME SECURITY ACT OF 1974

1. The authority citation for part 2509 continues to read as follows:

 Authority: 29 U.S.C. 1135. Secretary of Labor's Order 1-2011, 

77 FR 1088 (Jan. 9, 2012). Sections 2509.75-10 and 2509.75-2 issued 

under 29 U.S.C. 1052, 1053, 1054. Sec. 2509.75-5 also issued under 

29 U.S.C. 1002. Sec. 2509.95-1 also issued under sec. 625, Pub. L. 

109-280, 120 Stat. 780.

Sec. 2509.96-1 [Removed]

2. Remove Sec. 2509.96-1.

SUBCHAPTER B--DEFINITIONS AND COVERAGE UNDER THE EMPLOYEE RETIREMENT 

INCOME SECURITY ACT OF 1974

PART 2510--DEFINITIONS OF TERMS USED IN SUBCHAPTERS C, D, E, F, AND 

G OF THIS CHAPTER

3. The authority citation for part 2510 is revised to read as follows:

 Authority: 29 U.S.C. 1002(2), 1002(21), 1002(37), 1002(38), 

1002(40), 1031, and 1135; Secretary of Labor's Order 1-2011, 77 FR 

1088; Secs. 2510.3-21, 2510.3-101 and 2510.3-102 also issued under 

Sec. 102 of Reorganization Plan No. 4 of 1978, 5 U.S.C. App. 237. 

Section 2510.3-38 also issued under Pub. L. 105-72, Sec. 1(b), 111 

Stat. 1457 (1997).

4. Revise Sec. 2510.3-21 to read as follows:

Sec. 2510.3-21 Definition of ``Fiduciary.''

 (a) Investment advice. For purposes of section 3(21)(A)(ii) of the 
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Employee Retirement Income Security Act of 1974 (Act) and section 

4975(e)(3)(B) of the Internal Revenue Code (Code), except as provided 

in paragraph (b) of this section, a person renders investment advice 

with respect to moneys or other property of a plan or IRA described in 

paragraph (f)(2) of this section if--

 (1) Such person provides, directly to a plan, plan fiduciary, plan 

participant or beneficiary, IRA, or IRA owner the

[[Page 21957]]

following types of advice in exchange for a fee or other compensation, 

whether direct or indirect:

 (i) A recommendation as to the advisability of acquiring, holding, 

disposing or exchanging securities or other property, including a 

recommendation to take a distribution of benefits or a recommendation 

as to the investment of securities or other property to be rolled over 

or otherwise distributed from the plan or IRA;

 (ii) A recommendation as to the exercise of rights appurtenant to management of securities or other 

property, including recommendations as to the exercise of such rightsmanagement of securities 

or with respect to securities or other property to be rolled over or otherwise distributed from the 

plan or IRA;

 (iii) Valuation: reserved.An appraisal, fairness opinion, or similar statement whether 

verbal or written concerning the value of securities or other property 

if provided in connection with a specific transaction or transactions 

involving the acquisition, disposition, or exchange, of such securities 

or other property by the plan or IRA;

 (iv) A recommendation of a person who is also going to receive a 

fee or other compensation for providing any of the types of advice 

described in paragraphs (i) through (iii); and

 (2) Such person, either directly or indirectly (e.g., through or 

together with any affiliate),--

 (i) “(2) Such person –

(i) Expressly states that it is acting as a fiduciary within the meaning of the Act with 

respect to advice described in paragraph (a)(1) of this section that is or will be provided with 

respect to a particular account in connection with a particular recommendation of an 

investment transaction or a series of recommendations regarding such a transaction or series of 

transactions, provided that the express acknowledgement of fiduciary status with respect to a 

particular transaction, account or recommendation will not, by itself, cause the person to 

become a fiduciary with respect to any other transaction, account or recommendation.”

Represents or acknowledges that it is acting as a fiduciary 

within the meaning of the Act with respect to the advice described in 

paragraph (a)(1) of this section or

 (ii) “Renders the advice pursuant to a written or oral agreement, mutual arrangement or 

mutual understanding that the advice is individualized to the advice recipient to significantly 

influence investment or management decisions with respect to securities or other property of 

the plan or IRA.” 

“Provided however, that no person shall be deemed to be providing investment advice by 
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reason of recommending, urging, responding to requests for proposals regarding or otherwise 

promoting, its own hiring.”

Renders the advice pursuant to a written or verbal agreement, 

arrangement or understanding that the advice is individualized to, or 

that such advice is specifically directed to, the advice recipient for 

consideration in making investment or management decisions with respect 

to securities or other property of the plan or IRA.

 (b) Carve-outs--investment advice. “Except for advice described in paragraph (a)(1) of this 

section with respect to which the person has represented or acknowledged that it is acting as a 

fiduciary as described in paragraph (a)(2)(i) of this section with respect to a particular account 

(or particular assets in an account) and a particular transaction, the rendering of advice or other 

communications in conformance with a carve-out set forth in paragraph (b)(1) through (6) of 

this section shall not cause the person who renders the advice to be treated as a fiduciary under 

paragraph (a) of this section.”

Except for persons described in 

paragraph (a)(2)(i) of this section, tThe rendering of advice or other 

communications in conformance with a carve-out set forth in paragraph 

(b)(1) through (76) of this section shall not cause the person who 

renders the advice to be treated as a fiduciary under paragraph (a) of 

this section.

 (1) Counterparties to the plan--(i) COUNTERPARTIES AND SERVICE PROVIDERS. In such person's capacity as a 

counterparty, service provider, including exchanges and other similar trading platforms, to a plan or IRA, 

or representative of either the plan, the IRA or the counterparty or service provider, the person provides 

advice to a plan or IRA fiduciary who is independent of such person, with respect to an arm's length 

service arrangement, sale, purchase, loan or bilateral contract between the plan or IRA and person (or 

with respect to a proposal to enter into such an arrangement, sale, purchase, loan or bilateral contract), 

each a “transaction” for purposes of this subclause if, prior to or in connection with entering into a 

transaction, (A) the plan fiduciary represents that it has the requisite sophistication and experience in 

investment matters, and such person discloses to the fiduciary, participant or beneficiary, as the case 

may be, that the person has a financial interest in the matter, and that the person is not undertaking to 

provide impartial financial advice; provided such person has not acknowledged in writing that it is acting 

as a fiduciary (within the meaning of the Act) with respect to the transaction and the person does not 

receive a specific separate advisory fee for such recommendation or (B) such person knows or 

reasonably believes that the plan fiduciary (1) has responsibility for managing at least $50 million in 

assets (for purposes of this paragraph, when dealing with an individual employee benefit plan, a person 

may rely on representations from the independent plan fiduciary regarding the value of assets under 

management or (2) is a bank, savings and loan association, insurance company, an investment adviser 

registered either with the SEC under Section 203 of the Investment Advisers Act or with a state or 

foreign securities commission (or any agency or office performing like functions).Counterparty 

transaction

plan fiduciary with financial expertise. (A) In such person's capacity 

as a counterparty (or representative of a counterparty) to an employee 

benefit plan (as described in section 3(3) of the Act, the person 

provides advice to a plan fiduciary who is independent of such person 

and who exercises authority or control with respect to the management 

or disposition of the plan's assets, with respect to an arm's length

sale, purchase, loan or bilateral contract between the plan and the 
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counterparty, or with respect to a proposal to enter into such a sale, 

purchase, loan or bilateral contract,

if, prior to providing any 

recommendation with respect to the transaction, such person satisfies 

the requirements of either paragraph (b)(1)(i)(B) or (C) of this 

section.

 (B) Such person--

 (1) Obtains a written representation from the independent plan 

fiduciary that the independent fiduciary exercises authority or control

with respect to the management or disposition of the employee benefit 

plan's assets (as described in section 3(21)(A)(i) of the Act), that 

the employee benefit plan has 100 or more participants covered under 

the plan, and that the independent fiduciary will not rely on the 

person to act in the best interests of the plan, to provide impartial 

investment advice, or to give advice in a fiduciary capacity;

 (2) Fairly informs the independent plan fiduciary of the existence 

and nature of the person's financial interests in the transaction;

 (3) Does not receive a fee or other compensation directly from the 

plan, or plan fiduciary, for the provision of investment advice (as 

opposed to other services) in connection with the transaction; and

 (4) Knows or reasonably believes that the independent plan 

fiduciary has sufficient expertise to evaluate the transaction and to 

determine whether the transaction is prudent and in the best interest 

of the plan participants (the person may rely on written 

representations from the plan or the plan fiduciary to satisfy this 

subsection (b)(1)(i)(B)(4)).

 (C) Such person--

 (1) Knows or reasonably believes that the independent plan 

fiduciary has responsibility for managing at least $100 million in 

employee benefit plan assets (for purposes of this paragraph 

(b)(1)(i)(C), when dealing with an individual employee benefit plan, a 

person may rely on the information on the most recent Form 5500 Annual 

Return/Report filed for the plan to determine the value and, in the 

case of an independent fiduciary acting as an asset manager for 

multiple employee benefit plans, a person may rely on representations 

from the independent plan fiduciary regarding the value of employee 

benefit plan assets under management);

 (2) Fairly informs the independent plan fiduciary that the person 

is not undertaking to provide impartial investment advice, or to give 

advice in a fiduciary capacity; and

 (3) Does not receive a fee or other compensation directly from the 

plan, or plan fiduciary, for the provision of investment advice (as 

opposed to other services) in connection with the transaction.

 (ii) SWAP TRANSACTIONS – The person is a counterparty, service provider or representative thereof or of 

the plan in connection with a swap or security-based swap if, the plan or plan asset vehicle is 

represented by a fiduciary independent of the person; the person is a swap clearing firm or other service 

provider in relation to a swap, swap dealer, security-based swap dealer, major swap participant, or 

major security-based swap participant; the person (if a swap dealer, security-based swap dealer, 
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clearing firm or other similar service provider), is not acting as an advisor to the plan or plan asset 

vehicle in connection with the transaction; and in advance of providing any recommendations with 

respect to a transaction or a series of potential transactions, the person obtains a written representation 

from the independent plan fiduciary, that the fiduciary will not rely on recommendations provided by 

the person.Swap and security-based swap transactions. The person is a 

counterparty to an employee benefit plan (as described in section 3(3) 

of the Act) in connection with a swap or security-based swap, as 

defined in section 1(a) of the Commodity Exchange Act (7 U.S.C. 1(a) 

and section 3(a) of the Securities Exchange Act (15 U.S.C. 78c(a)), 

if--

 (A) The plan is represented by a fiduciary independent of the 

person;

 (B) The person is a swap dealer, security-based swap dealer, major 

swap participant, or major security-based swap participant;

 (C) The person (if a swap dealer or security-based swap dealer), is 

not acting as an advisor to the plan (within the meaning of section 

4s(h) of the Commodity Exchange Act or section 15F(h) of the Securities 

Exchange Act of 1934) in connection with the transaction; and

 (D) In advance of providing any recommendations with respect to the 

transaction, the person obtains a written representation from the 

independent plan fiduciary, that the fiduciary will not rely on 

recommendations provided by the person.

 (2) Employees. In his or her capacity as an employee of any 

employer or employee organization sponsoring the employee benefit plan 

(as described in section 3(3) of the Act) or an affiliate thereof, the person provides the 

advice directly or indirectly to a plan fiduciary, and he or she receives no fee or other 

compensation, direct or indirect, in connection with the advice beyond 

the employee's normal compensation for work performed for the employer 

or employee organization.

 (3) Platform providers. The person merely markets and makes 

available to an employee benefit plan (as described in section 3(3) of 

the Act)or to IRAs, without regard to the individualized needs of the plan, its 

participants, or beneficiaries, securities or other property through a 

platform or similar mechanism from which a plan fiduciary may select or 

monitor investment alternatives, including qualified default investment 

alternatives, into which plan participants or beneficiaries may direct 

the investment of assets held in, or contributed to, their individual 

accounts, if the person discloses in writing to the plan or IRA fiduciary that 

the person is not undertaking to provide

[[Page 21958]]

impartial investment advice or to give advice in a fiduciary capacity.

 (4) Selection and monitoring assistance. In connection with the 

activities described in paragraph (b)(3) of this section with respect 

to an employee benefit plan (as described in section 3(3) of the Act), 

the person--

 (i) Merely identifies investment alternatives that meet objective 
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criteria specified by the plan fiduciary (e.g., stated parameters 

concerning expense ratios, size of fund, type of asset, credit 

quality); or

 (ii) Merely provides objective financial data and comparisons with 

independent benchmarks to the plan fiduciary.

 (5) Financial reports and valuations. The person provides an 

appraisal, fairness opinion, or statement of value to--

 (i) An employee stock ownership plan (as defined in section 

407(d)(6) of the Act) regarding employer securities (as defined section 

407(d)(5) of the Act);

 (ii) An investment fund, such as a collective investment fund or 

pooled separate account, in which more than one unaffiliated plan has 

an investment, or which holds plan assets of more than one unaffiliated 

plan under 29 CFR 2510.3-101; or

 (iii) A plan, a plan fiduciary, a plan participant or beneficiary, 

an IRA or IRA owner solely for purposes of periodic statements, market quotes, annual reporting, 

compliance with the 

reporting and disclosure provisions under the Act, the Code, and the 

regulations, forms and schedules issued thereunder, or any applicable 

reporting or disclosure requirement under a Federal or state law, rule 

or regulation or self-regulatory organization rule or regulation.

 (6) Investment education. SEE SEPARATE COMPARE VERSION ATTACHED HERETO.

(7) NETWORKING AGREEMENTS AND INSTITUTIONAL REFERRALS – (A) In such person's capacity as a 

counterparty, service provider to a plan or IRA, representative or affiliate of the counterparty or 

service provider, or solicitor of the counterparty or service provider, the person provides a 

recommendation of a person who is going to receive a fee or other compensation for providing 

any of the types of advice described in paragraphs (a)(1)(i) through (a)(1)(ii) or for asset 

management, provided such person has not acknowledged in writing that it is acting as a 

fiduciary (within the meaning of the Act) with respect to the recommendation, the person only 

receives a nominal one-time cash payment from the recommended fiduciary in connection with 

such recommendation, and the person does not receive a specific separate advisory fee for such 

recommendation; (B) In such person's capacity as a counterparty, service provider to a plan or 

IRA, representative or affiliate of the counterparty or service provider, or solicitor of the 

counterparty or service provider, the person provides advice to a plan fiduciary who is 

independent of such person and who exercises authority or control with respect to the 

management or disposition of the plan's assets, with respect to an arm's length service 

arrangement, sale, purchase, loan or bilateral contract between the plan and a third-party 

adviser who is going to receive a fee or other compensation for providing any of the types of 

advice described in paragraphs (a)(1)(i) through (a)(1)(ii) or for asset management, each a 

“transaction” for purposes of this subclause, if, prior to entering into a relationship that may 

lead to a transaction, the plan fiduciary represents that it has the requisite sophistication and 

experience in investment matters, and such person discloses to the fiduciary, participant or 

beneficiary, as the case may be, that the person has a financial interest in the matter, and that 

the person is not undertaking to provide impartial financial advice; provided such person has 

not acknowledged in writing that it is acting as a fiduciary (within the meaning of the Act) with 

respect to the transaction.

Investment education. The person furnishes or makes available 
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any of the following categories of investment-related information and 

materials described in paragraphs (b)(6)(i) through (iv) of this 

section to a plan, plan fiduciary, participant or beneficiary, IRA or 

IRA owner irrespective of who provides or makes available the 

information and materials (e.g., plan sponsor, fiduciary or service 

provider), the frequency with which the information and materials are 

provided, the form in which the information and materials are provided 

(e.g., on an individual or group basis, in writing or orally, or via 

call center, video or computer software), or whether an identified 

category of information and materials is furnished or made available 

alone or in combination with other categories of information and 

materials identified in paragraphs (b)(6)(i) through (iv), provided 

that the information and materials do not include (standing alone or in 

combination with other materials) recommendations with respect to 

specific investment products or specific plan or IRA alternatives, or 

recommendations on investment, management, or value of a particular 

security or securities, or other property.

 (i) Plan information. Information and materials that, without 

reference to the appropriateness of any individual investment 

alternative or any individual benefit distribution option for the plan 

or IRA, or a particular participant or beneficiary or IRA owner, 

describe the terms or operation of the plan or IRA, inform a plan 

fiduciary, participant, beneficiary, or IRA owner about the benefits of 

plan or IRA participation, the benefits of increasing plan or IRA 

contributions, the impact of preretirement withdrawals on retirement 

income, retirement income needs, varying forms of distributions, 

including rollovers, annuitization and other forms of lifetime income 

payment options (e.g., immediate annuity, deferred annuity, or 

incremental purchase of deferred annuity), advantages, disadvantages 

and risks of different forms of distributions, or describe investment 

objectives and philosophies, risk and return characteristics, 

historical return information or related prospectuses of investment 

alternatives under the plan or IRA.

 (ii) General financial, investment and retirement information. 

Information and materials on financial, investment and retirement 

matters that do not address specific investment products, specific plan 

or IRA alternatives or distribution options available to the plan or 

IRA or to participants, beneficiaries and IRA owners, or specific 

alternatives or services offered outside the plan or IRA, and inform 

the plan fiduciary, participant or beneficiary, or IRA owner about--

 (A) General financial and investment concepts, such as risk and 

return, diversification, dollar cost averaging, compounded return, and 

tax deferred investment;

 (B) Historic differences in rates of return between different asset 

classes (e.g., equities, bonds, or cash) based on standard market 

indices;

 (C) Effects of inflation;

 (D) Estimating future retirement income needs;
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 (E) Determining investment time horizons;

 (F) Assessing risk tolerance;

 (G) Retirement-related risks (e.g., longevity risks, market/

interest rates, inflation, health care and other expenses); and

 (H) General methods and strategies for managing assets in 

retirement (e.g., systematic withdrawal payments, annuitization, 

guaranteed minimum withdrawal benefits), including those offered 

outside the plan or IRA.

 (iii) Asset allocation models. Information and materials (e.g., pie 

charts, graphs, or case studies) that provide a plan fiduciary, 

participant or beneficiary, or IRA owner with models of asset 

allocation portfolios of hypothetical individuals with different time 

horizons (which may extend beyond an individual's retirement date) and 

risk profiles, where--

 (A) Such models are based on generally accepted investments 

theories that take into account the historic returns of different asset 

classes (e.g., equities, bonds, or cash) over defined periods of time;

 (B) All material facts and assumptions on which such models are 

based (e.g., retirement ages, life expectancies, income levels, 

financial resources, replacement income ratios, inflation rates, and 

rates of return) accompany the models;

 (C) Such models do not include or identify any specific investment 

product or specific alternative available under the plan or IRA; and

 (D) The asset allocation models are accompanied by a statement 

indicating that, in applying particular asset allocation models to 

their individual situations, participants, beneficiaries, or IRA owners 

should consider their other assets, income, and investments (e.g., 

equity in a home, Social Security benefits, individual retirement plan 

investments, savings accounts and interests in other qualified and nonqualified plans) in addition to their interests in the plan or IRA, to 

the extent those items are not taken into account in the model or 

estimate.

 (iv) Interactive investment materials. Questionnaires, worksheets, 

software, and similar materials which provide a plan fiduciary, 

participant or beneficiary, or IRA owners the means to estimate future 

retirement income needs and assess the impact of different asset 

allocations on retirement income; questionnaires, worksheets, software 

and similar materials which allow a plan fiduciary, participant or 

beneficiary, or IRA owners to evaluate distribution options, products 

or vehicles by providing information under paragraphs (b)(6)(i) and 

(ii) of this section; questionnaires, worksheets, software, and similar 

materials that provide a plan fiduciary, participant or beneficiary, or 

IRA owner the means to estimate a retirement income stream

[[Page 21959]]

that could be generated by an actual or hypothetical account balance, 

where--
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 (A) Such materials are based on generally accepted investment 

theories that take into account the historic returns of different asset 

classes (e.g., equities, bonds, or cash) over defined periods of time;

 (B) There is an objective correlation between the asset allocations 

generated by the materials and the information and data supplied by the 

participant, beneficiary or IRA owner;

 (C) There is an objective correlation between the income stream 

generated by the materials and the information and data supplied by the 

participant, beneficiary or IRA owner;

 (D) All material facts and assumptions (e.g., retirement ages, life 

expectancies, income levels, financial resources, replacement income 

ratios, inflation rates, rates of return and other features and rates 

specific to income annuities or systematic withdrawal plan) that may 

affect a participant's, beneficiary's or IRA owner's assessment of the 

different asset allocations or different income streams accompany the 

materials or are specified by the participant, beneficiary or IRA 

owner;

 (E) The materials do not include or identify any specific 

investment alternative available or distribution option available under 

the plan or IRA, unless such alternative or option is specified by the 

participant, beneficiary or IRA owner; and

 (F) The materials either take into account other assets, income and 

investments (e.g., equity in a home, Social Security benefits, 

individual retirement account/annuity investments, savings accounts, 

and interests in other qualified and non-qualified plans) or are 

accompanied by a statement indicating that, in applying particular 

asset allocations to their individual situations, or in assessing the 

adequacy of an estimated income stream, participants, beneficiaries or 

IRA owners should consider their other assets, income, and investments 

in addition to their interests in the plan or IRA.

 (v) The information and materials described in paragraphs (b)(6)(i) 

through (iv) of this section represent examples of the type of 

information and materials that may be furnished to participants, 

beneficiaries and IRA owners without such information and materials 

constituting investment advice. Determinations as to whether the 

provision of any information, materials or educational services not 

described herein constitutes the rendering of investment advice must be 

made by reference to the criteria set forth in paragraph (a) of this 

section.

 (c) Scope of fiduciary duty--investment advice. A person who is a 

fiduciary with respect to an employee benefit plan or IRA by reason of 

rendering investment advice (as defined in paragraph (a) of this 

section) for a fee or other compensation, direct or indirect, with 

respect to any securities or other property of such plan, or having any 

authority or responsibility to do so, shall not be deemed to be a 

fiduciary regarding any assets of the plan or IRA with respect to which 
10

such person does not have any discretionary authority, discretionary 

control or discretionary responsibility, does not exercise any 

authority or control, does not render investment advice (as defined in 

paragraph (a)(1) of this section) for a fee or other compensation, and 

does not have any authority or responsibility to render such investment 

advice, provided that nothing in this paragraph shall be deemed to:

 (1) Exempt such person from the provisions of section 405(a) of the 

Act concerning liability for fiduciary breaches by other fiduciaries 

with respect to any assets of the plan; or

 (2) Exclude such person from the definition of the term ``party in 

interest'' (as set forth in section 3(14)(B) of the Act or 

``disqualified person'' as set forth in section 4975(e)(2) of the Code) 

with respect to a plan.

 (d) (d) Execution of securities transactions. (1) A person who is a broker or dealer registered under the 

Securities Exchange Act of 1934, a reporting dealer who makes primary markets in securities of the 

United States Government or of an agency of the United States Government and reports daily to the 

Federal Reserve Bank of New York its positions with respect to such securities and borrowings thereon, 

or a bank supervised by the United States or a State, or a bank or broker dealer covered under the laws 

of a foreign jurisdiction, shall not be deemed to be a fiduciary, within the meaning of section 3(21)(A) of 

the Act or section 4975(e)(3)(B) of the Code, with respect to an employee benefit plan or IRA solely 

because such person executes transactions for the purchase or sale of securities or currency on behalf of 

such plan or involving such plan in the ordinary course of its business as a broker, dealer, or bank, 

pursuant to instructions of a fiduciary with respect to such plan or IRA, if:

 (i) Neither the fiduciary nor any affiliate of such fiduciary is such broker, dealer, or bank; and

 (ii) The instructions specify:

 (A) The security or currency to be purchased or sold;

 (B) A price range within which such security or currency is to be purchased or sold, or that the 

security or currency is to be executed at the current market price, or, if such security is issued by 

an open-end investment company registered under the Investment Company Act of 1940 (15 

U.S.C. 80a-1, et seq.), a price which is determined in accordance with Rule 22c1 under the 

Investment Company Act of 1940 (17 CFR270.22c1);

 (C) A time span during which such security or currency may be purchased or sold (not to 

exceed five business days); and

 (D) The minimum or maximum quantity of such security or currency which may be purchased 

or sold within such price range, or, in the case of a security issued by an open-end investment 

company registered under the Investment Company Act of 1940, the minimum or maximum 

quantity of such security which may be purchased or sold, or the value of such security in dollar 

amount which may be purchased or sold, at the price referred to in paragraph (d)(1)(ii)(B) of this 

section.

Execution of securities transactions. (1) A person who is a 

broker or dealer registered under the Securities Exchange Act of 1934, 

a reporting dealer who makes primary markets in securities of the 

United States Government or of an agency of the United States 

Government and reports daily to the Federal Reserve Bank of New York 

its positions with respect to such securities and borrowings thereon, 

or a bank supervised by the United States or a State, shall not be 

deemed to be a fiduciary, within the meaning of section 3(21)(A) of the 

Act or section 4975(e)(3)(B) of the Code, with respect to an employee 
11

benefit plan or IRA solely because such person executes transactions 

for the purchase or sale of securities on behalf of such plan in the 

ordinary course of its business as a broker, dealer, or bank, pursuant 

to instructions of a fiduciary with respect to such plan or IRA, if:

 (i) Neither the fiduciary nor any affiliate of such fiduciary is 

such broker, dealer, or bank; and

 (ii) The instructions specify:

 (A) The security to be purchased or sold;

 (B) A price range within which such security is to be purchased or 

sold, or, if such security is issued by an open-end investment company 

registered under the Investment Company Act of 1940 (15 U.S.C. 80a-1, 

et seq.), a price which is determined in accordance with Rule 22c1 

under the Investment Company Act of 1940 (17 CFR270.22c1);

 (C) A time span during which such security may be purchased or sold 

(not to exceed five business days); and

 (D) The minimum or maximum quantity of such security which may be 

purchased or sold within such price range, or, in the case of a 

security issued by an open-end investment company registered under the 

Investment Company Act of 1940, the minimum or maximum quantity of such 

security which may be purchased or sold, or the value of such security 

in dollar amount which may be purchased or sold, at the price referred 

to in paragraph (d)(1)(ii)(B) of this section.

 (2) A person who is a broker-dealer, reporting dealer, or bank 

which is a fiduciary with respect to an employee benefit plan or IRA 

solely by reason of the possession or exercise of discretionary 

authority or discretionary control in the management of the plan or 

IRA, or the management or disposition of plan or IRA assets in 

connection with the execution of a transaction or transactions for the 

purchase or sale of securities on behalf of such plan or IRA which 

fails to comply with the provisions of paragraph (d)(1) of this 

section, shall not be deemed to be a fiduciary regarding any assets of 

the plan or IRA with respect to which such broker-dealer, reporting 

dealer or bank does not have any discretionary authority, discretionary 

control or discretionary responsibility, does not exercise any 

authority or control, does not render investment advice (as defined in 

paragraph (a) of this section) for a fee or other compensation, and 

does not have any authority or responsibility to render such investment 

advice, provided that nothing in this paragraph shall be deemed to:

 (i) Exempt such broker-dealer, reporting dealer, or bank from the 

provisions of section 405(a) of the Act concerning liability for 

fiduciary breaches by other fiduciaries with respect to any assets of 

the plan; or

 (ii) Exclude such broker-dealer, reporting dealer, or bank from the 

definition of the term party in interest (as set forth in section 

3(14)(B) of the Act) or disqualified person 4975(e)(2) of the Code with 

respect to any assets of the plan or IRA.

[[Page 21960]]
12

 (e) Internal Revenue Code. Section 4975(e)(3) of the Code contains 

provisions parallel to section 3(21)(A) of the Act which define the 

term ``fiduciary'' for purposes of the prohibited transaction 

provisions in Code section 4975. Effective December 31, 1978, section 

102 of the Reorganization Plan No. 4 of 1978, 5 U.S.C. App. 237 

transferred the authority of the Secretary of the Treasury to 

promulgate regulations of the type published herein to the Secretary of 

Labor. All references herein to section 3(21)(A) of the Act should be 

read to include reference to the parallel provisions of section 

4975(e)(3) of the Code. Furthermore, the provisions of this section 

shall apply for purposes of the application of Code section 4975 with 

respect to any plan described in Code section 4975(e)(1).

 (f) Definitions. For purposes of this section--

 (1) Recommendation means a communication that, based on its content, context, and 

presentation, would reasonably be viewed as a call to action or specific endorsement that the 

advice recipient engage in or refrain from taking a particular course of action. Recommendation 

does not include communications that merely suggest actions or course of actions for

consideration with no call to action to engage in the action or course of action. A 

communication that would not be a recommendation within the meaning of applicable FINRA 

rules will not be deemed a recommendation under this section.

``Recommendation'' means 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.

 (2)(i) ``Plan'' means any employee benefit plan described in 

section 3(3) of the Act and any plan described in section 4975(e)(1)(A) 

of the Code, and

 (ii) ``IRA'' means any trust, account or annuity described in Code 

section 4975(e)(1)(B) through (DF), including, for example, an 

individual retirement account described in section 408(a) of the Code 

and a health savings account described in section 223(d) of the Code.

 (3) ``Plan participant'' means for a plan described in section 3(3) 

of the Act, a person described in section 3(7) of the Act.

 (4) ``IRA owner'' means with respect to an IRA either the person 

who is the owner of the IRA or the person for whose benefit the IRA was 

established.

 (5) ``Plan fiduciary'' means a person described in section (3)(21) 

of the Act and 4975(e)(3) of the Code.

 (6) ``Fee or other compensation, direct or indirect'' for purposes 

of this section and section 3(21)(A)(ii) of the Act, means any fee or 

compensation for the advice received by the person (or by an affiliate) 

from any source and any fee or compensation incident to the transaction 

in which the investment advice has been rendered or will be rendered. 

The term fee or other compensation includes, for example, brokerage 

fees, mutual fund and insurance sales commissions, provided, however that a.n advisor’s 

recommendations which do not result in a transaction that includes compensation for that advisor 

within a reasonable period of time is not compensation that meets the requirements of this definition.
13

 (7) ``Affiliate'' includes: Any person directly or indirectly, 

through one or more intermediaries, controlling, controlled by, or 

under common control with such person; any officer, director, partner, 

employee or relative (as defined in section 3(15) of the Act) of such 

person; and any corporation or partnership of which such person is an 

officer, director or partner.

 (8) ``Control'' for purposes of paragraph (f)(7) of this section 

means the power to exercise a controlling influence over the management 

or policies of a person other than an individual.

 Signed at Washington, DC, this 14th day of April, 2015.

Phyllis C. Borzi,

Assistant Secretary, Employee Benefits Security Administration, 

Department of Labor.

[FR Doc. 2015-08831 Filed 4-15-15; 11:15 am]

BILLING CODE 4510-29-P
(6) Investment education. The person furnishes or makes available 

any of the following categories of investment-related information and 

materials described in paragraphs (b)(6)(i) through (iv) of this 

section to a plan, plan fiduciary, participant or beneficiary, eligible employee, IRA or 

IRA owner irrespective of who provides or makes available the 

information and materials (e.g., plan sponsor, fiduciary or service 

provider), the frequency with which the information and materials are 

provided, the form in which the information and materials are provided 

(e.g., on an individual or group basis, in writing or orally, or via 

call center, video or computer software), or whether an identified 

category of information and materials is furnished or made available 

alone or in combination with other categories of information and 

materials identified in paragraphs (b)(6)(i) through (iv), provided 

that the information and materials do not include (standing alone or in 

combination with other materials) recommendations with respect to 

specific investment products or specific plan or IRA alternatives, or 

recommendations on investment, management, or value of a particular 

security or securities, or other property.

 (i) Plan information. Information and materials that, without reference to the appropriateness of any 

individual investment alternative or any individual benefit distribution option for the plan 

reference to the appropriateness of any individual investment 

alternative or any individual benefit distribution option for the plan 

or IRA, or a particular eligible employee, participant or beneficiary or IRA owner, 

describe the terms or operation of the plan or IRA, inform a plan 

fiduciary, eligible employee, participant, beneficiary, or IRA owner about the benefits of 

plan or IRA participation, the benefits of increasing plan or IRA 
contributions, the impact of preretirement withdrawals on retirement 

income, retirement income needs, varying forms of distributions, 

including rollovers, annuitization and other forms of lifetime income 

payment options (e.g., immediate annuity, deferred annuity, or 

incremental purchase of deferred annuity), advantages, disadvantages 

and risks of different forms of distributions, or describe investment 

objectives and philosophies, risk and return characteristics, 

historical return information or related prospectuses of investment 

alternatives under the plan or IRA.

 (ii) General financial, investment and retirement information. 

Information and materials on financial, investment and retirement 

matters that do not addressrecommend specific investment products, specific plan 

or IRA alternatives or distribution options available to the plan or 

IRA or to eligible employees, participants, beneficiaries and IRA owners, or specific 

alternatives or services offered outside the plan or IRA, andunless at least three examples are provided 

but which inform 

the plan fiduciary, participant or beneficiary, or IRA owner about--

 (A) General financial and investment concepts, such as risk and return, diversification, dollar cost 

averaging, compounded return, and tax deferred investment;

return, diversification, dollar cost averaging, compounded return, and 

tax deferred investment;

 (B) Historic differences in rates of return between different asset 

classes (e.g., equities, bonds, or cash) based on standard market 

indices;

 (C) Effects of inflation;

 (D) Estimating future retirement income needs;
 (E) Determining investment time horizons;

 (F) Assessing risk tolerance;

 (G) Retirement-related risks (e.g., longevity risks, market/

interest rates, inflation, health care and other expenses); and

 (H) General methods and strategies for managing assets in retirement (e.g., systematic withdrawal 

payments, annuitization, guaranteed minimum withdrawal benefits), including those offered outside the 

plan or IRA.

retirement (e.g., systematic withdrawal payments, annuitization, 

guaranteed minimum withdrawal benefits), including those offered 

outside the plan or IRA.

 (iii) Asset allocation models. Information and materials (e.g., pie 

charts, graphs, or case studies) that provide a plan fiduciary, 

participant or beneficiary, or IRA owner with models of asset 

allocation portfolios of hypothetical individuals with different time 

horizons (which may extend beyond an individual's retirement date) and 

risk profiles, where--

 (A) Such models are based on generally accepted investments 

theories that take into account the historic returns of different asset 

classes (e.g., equities, bonds, or cash) over defined periods of time;

 (B) All material facts and assumptions on which such models are based (e.g., retirement ages, life 

expectancies, income levels, financial resources, replacement income ratios, inflation rates, and rates of 

return) accompany the models;

based (e.g., retirement ages, life expectancies, income levels, 

financial resources, replacement income ratios, inflation rates, and 

rates of return) accompany the models;

 (C) Such models do not include or identifyrecommend any specific investment 

product or specific alternative available under the plan or IRA unless three examples are provided; and
 (D) The asset allocation models are accompanied by a statement 

indicating that, in applying particular asset allocation models to 

their individual situations, eligible employees, participants, beneficiaries, or IRA owners 

should consider their other assets, income, and investments (e.g., 

equity in a home, Social Security benefits, individual retirement plan 

investments, savings accounts and interests in other qualified and nonqualified plans) in addition to their interests in the plan or IRA, to 

the extent those items are not taken into account in the model or 

estimate.

 (iv) Interactive investment materials. Questionnaires, worksheets, 

software, and similar materials which provide a plan fiduciary, 

eligible employee, participant or beneficiary, or IRA owners the means to estimate future 

retirement income needs and assess the impact of different asset 

allocations on retirement income; questionnaires, worksheets, software 

and similar materials which allow a plan fiduciary, eligible employee, participant or 

beneficiary, or IRA owners to evaluate distribution options, products 

or vehicles by providing information under paragraphs (b)(6)(i) and 

(ii) of this section; questionnaires, worksheets, software, and similar 

materials that provide a plan fiduciary, participant or beneficiary, or 

IRA owner the means to estimate a retirement income stream

[[Page 21959]]

that could be generated by an actual or hypothetical account balance, 

where--
 (A) Such materials are based on generally accepted investment 

theories that take into account the historic returns of different asset 

classes (e.g., equities, bonds, or cash) over defined periods of time;

 (B) There is an objective correlation between the asset allocations 

generated by the materials and the information and data supplied by the 

participant, beneficiary or IRA owner;

 (C) There is an objective correlation between the income stream 

generated by the materials and the information and data supplied by the 

eligible employee, participant, beneficiary or IRA owner;

 (D) All material facts and assumptions (e.g., retirement ages, life 

expectancies, income levels, financial resources, replacement income 

ratios, inflation rates, rates of return and other features and rates 

specific to income annuities or systematic withdrawal plan) that may 

affect a participant's, eligible employee’s, beneficiary's or IRA owner's assessment of the 

different asset allocations or different income streams accompany the 

materials or are specified by the eligible employee, participant, beneficiary or IRA 

owner;

 (E) The materials do not include or identifyrecommend any specific 

investment alternative available or distribution option available under 

the plan or IRA, unless at least three examples are provided or unless such alternative or option is 

specified by the 

participant, beneficiary or IRA owner; and

 (F) The materials either take into account other assets, income and 

investments (e.g., equity in a home, Social Security benefits, 

individual retirement account/annuity investments, savings accounts, 

and interests in other qualified and non-qualified plans) or are 
accompanied by a statement indicating that, in applying particular 

asset allocations to their individual situations, or in assessing the 

adequacy of an estimated income stream, eligible employees, participants, beneficiaries or 

IRA owners should consider their other assets, income, and investments 

in addition to their interests in the plan or IRA.

 (v) The information and materials described in paragraphs (b)(6)(i) 

through (iv) of this section represent examples of the type of 

information and materials that may be furnished to participants, 

beneficiaries and IRA owners without such information and materials 

constituting investment advice. Determinations as to whether the 

provision of any information, materials or educational services not 

described herein constitutes the rendering of investment advice must be 

made by reference to the criteria set forth in paragraph (a) of this section.

section. (vi) Rollover Education. Oral or written information which does not include recommendations 

or advice but merely lays out the following considerations, each of which must be mentioned without 

biased emphasis:

(A) Investment Options—An IRA often enables an investor to select from a broader range of investment 

options than a plan. The importance of this factor will depend in part on how satisfied the investor is 

with the options available under the plan under consideration. For example, an investor who is satisfied 

by the low-cost institutional funds available in some plans may not regard an IRA’s broader array of 

investments as an important factor.

(B) Fees and Expenses—Both plans and IRAs typically involve (i) investment-related expenses and (ii) 

plan or account fees. Investment-related expenses may include sales loads, commissions, the expenses 

of any mutual funds in which assets are invested and investment advisory fees. Plan fees typically 

include plan administrative fees (e.g., recordkeeping, compliance, trustee fees) and fees for services 

such as access to a customer service representative. In some cases, employers pay for some or all of the 

plan’s administrative expenses. An IRA’s account fees may include, for example, administrative, account 

set-up and custodial fees.
(C) Services—An investor may wish to consider the different levels of service available under each 

option. Some plans, for example, provide access to investment advice, planning tools, telephone help 

lines, educational materials and workshops. Similarly, IRA providers offer different levels of service, 

which may include full brokerage service, investment advice, distribution planning and access to 

securities execution online.

(D) Penalty-Free Withdrawals—If an employee leaves her job between age 55 and 591⁄2, she may be able 

to take penalty-free withdrawals from a plan. In contrast, penalty-free withdrawals generally may not be 

made from an IRA until age 591⁄2. 

(E) Protection from Creditors and Legal Judgments—Generally speaking, plan assets have unlimited 

protection from creditors under federal law, while IRA assets are protected in bankruptcy proceedings 

only. State laws vary in the protection of IRA assets in lawsuits.

(F) Required Minimum Distributions—Once an individual reaches age 701⁄2, the rules for both plans and 

IRAs require the periodic withdrawal of certain minimum amounts, known as the required minimum 

distribution. If a person is still working at age 701⁄2, however, he generally is not required to make 

required minimum distributions from his current employer’s plan. This may be advantageous for the 

increasing population of Americans who plan to work into their 70s.

(G) Employer Stock—An investor who holds significantly appreciated employer stock in a plan should 

consider the negative tax consequences of rolling the stock to an IRA. If employer stock is transferred inkind to an IRA, stock appreciation will be taxed as ordinary income upon distribution. The tax 

advantages of retaining employer stock in a non-qualified account should be balanced with the 

possibility that the investor may be excessively concentrated in employer stock. It can be risky to have 

too much employer stock in one’s retirement account; for some investors, it may be advisable to 

liquidate the holdings and roll over the value to an IRA, even if it means losing long-term capital gains 

treatment on the stock’s appreciation.
SIFMA DOL Fiduciary Operations - Cost Analysis

1

Non-Exclusive Considerations for Start-up and annual ongoing costs:

 information technology suppliers and vendors; 

 information technology systems, hardware and software, 

support and testing/audit; 

 outside legal counsel costs

 outside compliance consultant costs

 communications, marketing, business review and risk 

review; 

 training materials: creating, editing, and circulating new 

materials; reviewing, editing, finalizing, and publishing all 

impacted training materials; 

 training: providing training and communication to all 

impacted personnel, particularly sales and operations 

personnel; 

 reviewing and updating all existing client contracts and 

client disclosures (including documentation and delivery 

of disclosure); 

 reviewing and updating of sales surveillance tools, all 

impacted policies and procedures, including written 

supervisory procedures; 

 publishing and distributing revised policies and 

procedures; 

 reviewing, editing, finalizing and publishing all impacted 

marketing materials; and 

 updating exam test modules and instructions, training 

examiners, and executing additional testing procedures 

across all branch offices 

 other out-of-pocket costs

 employee- and staff-related costs

Small firms:

• Less than $50 million in capital

Medium firms:

• $50 million to $1billion in capital

Large firms:

• Over $1 billion in capital

Clearing firms:

• Firms who clear on behalf of 

introducing firms

Self-clearing firms:

• Firms who clear their own business, 

but do not clear on behalf of 

anyone else

Introducing firms:

• Firms who introduce accounts to 

clearing firms for clearance and 

settlement

Purpose & Assumptions Survey Target Profiles Key Cost Components

Purpose: this survey plans to obtain a 

high-level firm cost estimate of: 

(1) the total dollar amount it would cost 

your firm to build and implement the 

current DOL Proposal, and 

(2) the total dollar amount it would cost 

your firm to maintain the current 

DOL Proposal on a yearly basis. 

Assumptions: Aggregate cost including all 

sub-requirements

o Business Interest Contract Exemption

o Principal Transaction Exemption

o Fiduciary Analysis

o Other Prohibited Transaction 

Exemption Changes

• Results are based on respondents’ 

best estimates based on current 

understand of the proposed rule’s 

requirements

• Results will reflect an average of 

responses from firms of similar 

profiles, individual results will vary by 

individual firms and between various 

firm profiles

• Results should not be relied upon or 

used for purposes of budgeting and 

planning
2

High-Level Firm Cost Estimate 

DOL Proposal Aggregate Costs

Please use $#,###. format when entering costs below.

If you have the granular cost numbers, please provide. 

However, the only required responses below are the total cost fields.

Start-up-Costs Ongoing Costs/Yr.

Contract costs

Disclosure costs

Record keeping, retention and reporting costs

Supervisory system and compliance costs

Other (pencils to servers)

Total Cost (Required) $#,### $#,###