RICHARD E. NEAL

COMMITTEE ON WAYS AND MEANS
SECOND DISTRICT, MASSACHUSETTS

RANKING MEMBER,
SUBCOMMITTEE ON SELECT
REVENUE MEASURES

DEMOCRATIC LEADER,
FRIENDS OF IRELAND CAUCUS

AT-LARGE WHIP

Congress of the United States
Gouse of Representatives OAMOUE

Washington, AC 20515
April 15, 2011

The Honorable Timothy Geithner
U.S. Treasury Department

1500 Pennsylvania Avenue
Washington, D.C. 20220

The Honorable Hilda Solis
U.S. Labor Department
200 Constitution Ave.
Washington, D.C. 20210

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Dear Secretary Geithner and Secretary Solis:

We are writing today with respect to the Department of Labor’s proposal to redefine the
term “fiduciary” for purposes of the Employee Retirement Income Security Act of 1974

(“ERISA”) and for purposes of certain Internal Revenue Code provisions affecting IRAs and
similar arrangements.

We understand the Department’s desire to update the definition of a fiduciary and we
support your efforts to examine the relationship between advisors and plans sponsors,
participants, and investors. The definition of fiduciary needs to be broad enough to ensure that
advice provided to retirement plan participants and plan sponsors is designed to serve their
interests. On the other hand, if the definition is too broad, we risk losing investment education
and information if advisors withdraw from these services, leading to less choice and higher costs.

Overall, we believe any new rule must be balanced in order to increase protections for
participants without adversely impacting access or costs.

We believe that this can be achieved with modifications to your proposed rule. Assistant
Secretary Borzi has been very generous with her time in agreeing to meet with interested
Members and staff on this issue. While her assurances that the exemption process is ongoing
and could provide further clarifications contemporaneous with the release of the final rule are
encouraging, we share the concerns that some have voiced that greater transparency regarding

the contemplated modifications and clarifications, such as through re-proposing the rule, would
be very beneficial.

Given that other agencies are pursuing similar regulations affecting the same advisors
within the same industry but along differing timelines, we urge the Department to coordinate its
efforts with all affected government agencies, pursuant to the President’s Executive Order on

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Improving Regulations. There are many examples of issues where the Department should
consider the effect of its proposed regulation on the availability of investment information, and
where the Department needs to coordinate with other agencies. For instance, the staff of the
Securities and Exchange Commission (“SEC”) has issued a study stating that investors are
confused and harmed by receiving advice from advisors that are subject to different duties of
care. Yet the Department’s proposal and the SEC staff's recommendation together would
enshrine a system whereby advisors can have different duties to the same investor, one duty with
respect to amounts saved in an IRA or a retirement plan and a different duty with respect to other
amounts.

Moreover, it is critical that any new definition of fiduciary not effectively eliminate the
provision of investment information by broker/dealers through rules that are inconsistent with the
longstanding structure of the broker/dealer industry. Small businesses and IRA owners in
particular rely on broker/dealers for critical investment information and education. We are
cognizant of Assistant Secretary Borzi’s perspective that broker/dealers can subvert the existing
regulatory structure, but a single set of rules from a coordinated regulatory effort would simply
work better in this case. Since Treasury will play a significant role in enforcement of the new
rules as they apply to IRAs, it is also essential that Treasury be included in the formulation of the
new regulations.

Under Dodd-Frank, the Financial Stability Oversight Council (FSOC) is charged with the
responsibility of facilitating coordination of rulemaking by Federal agencies that impacts the
financial system. Since you serve as the chairman of FSOC, Secretary Geithner, you have a
critical role to play in ensuring that the new regulations from the Department of Labor and the
Securities and Exchange Commission bring clarity, and not confusion, to the definition of
fiduciary.

While we support your efforts to strengthen the fiduciary protections, we hope you will
work for a balanced and coordinated rule. We are ready to assist in those efforts.

Sincerely,

Richard E. Neal
Member of Congress

Mike Thompson Yn Larson
Member of Congress ‘ember of Congress


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Ron Kind
Member of Congress

cc: The Honorable Jacob Lew

Office of Management & Budget
725 17th Street, NW

Washington, D.C. 20503

Bill Pascrell, Jr.
Member of Congress

Memberjof Congress