Via Electronic Mail and www.regulations.gov 

Office of Regulations and Interpretations Employee Benefits Security Administration 

Attn: Conflict of Interest Rule, Room N-5655 U.S. Department of Labor 

200 Constitution Avenue N.W. Washington, D.C. 20210 

Office of Exemption Determinations Employee Benefits Security Administration Attn: 

D11712 and D-11713

U.S. Department of Labor

200 Constitution Avenue, N.W. Washington, D.C. 20210 

RE: Proposed Conflict of Interest Rule and Related Proposals, RIN 1210-AB32

and ZRIN: 1210-ZA25 

Good Morning, Ladies and Gentlemen: 

I appreciate the opportunity to comment on the United States Department of Labor’s 

(“Department”) Employee Benefits Security Administration's (“EBSA”) proposed 

regulation(s) under the Employee Retirement Income Security Act of 1974, as amended 

(“ERISA”) that will redefine the term “fiduciary” under Section 3(21) of ERISA and 

Section 4975(e) of the Internal Revenue Code of 1986, as amended, and further, will 

establish a best interest contract exemption (such proposals hereinafter individually as 

well as collective referred to as the “Proposal”). I trust that my comments are helpful to 

the Department as it assesses the potential impact of the Proposal, particularly on 

individual retail retirement investors such as myself, and considers the recommended 

revisions as more fully set forth below. 

I. INTRODUCTION 

As an initial matter, I respectfully adopt the comments offered by the Small Business 

Administration's (“SBA”) Office of Advocacy (“Advocacy”) on July 17, 2015 (Available 

at: http://www.dol.gov/ebsa/pdf/1210-AB32-2-00403.pdf) (Last Visited on September 

15, 2015), and wholly incorporate and integrate the same herein by reference thereto. 

Specifically, I share the concerns advanced by the SBA's Advocacy's Acting General 

Counsel, Ms. Claudia Rodgers, that the Proposal evinces a departure from the essential, 

threshold requirements of clearly- established law, namely, the Regulatory Flexibility 

Act, 5 U.S.C. Section 601, et seq. (“RFA”), because the Department's Initial Regulatory 

Flexibility Analysis (“IRFA”) contained in the same is deficient. Id. at pp. 1-5. 

Accordingly, I concur with Advocacy's recommendation that the Department republish 

for public comment a Supplemental IRFA before proceeding with its Proposal. 

Furthermore, I request the Department conduct another round of live hearings on a 

Supplemental IRFA so that it may proceed on the basis of a fully-developed rulemaking 

record. 

II. DISCUSSION

A. Preliminary Statement. 

Even if the Department has a legal basis upon which it can lawfully proceed with its 

Proposal by certifying that the public interest will not be advanced by a Supplemental 

IRFA, nevertheless, the Proposal is flawed because: (1) the Department's proposed broad 

definition of the term “fiduciary” would certainly operate to diminish the ability of retail 

brokerage firms like Charles Schwab, Fidelity, and TD Ameritrade to provide free or low 
cost investment data, tools, research, education and support services to retail retirement 

investors (“IRA Investor(s)”); and (2) the Department's proposed limited list of permitted 

assets which, notably, excludes exchange-listed call and put options, amounts to no more 

than a solution searching for a problem, and is, thus, very harmful to IRA investors, 

including, by way of specific example, but not necessarily limited to, those retirees who 

rely on premiums earned from selling call options fully secured by stock ownership to 

supplement their income. I will touch on each point, in turn. 

B. 

The Department's broad definition of the term “fiduciary” would pose a 

substantial harm to IRA investors. 

The Department’s proposed broad definition of the term“fiduciary” would operate to 

diminish the ability of retail brokerage firms to provide free or low cost investment data, 

tools, research, education and support services to IRA investors. In fact, absent a socalled “best interest contract,” a firm would only be able to deal with IRAs: (1) on a 

strictly order-taker basis; or (2) pursuant to an advisory account with an asset-based fee. 

Under the first alternative, IRA investors would experience the bare bones, self-directed 

brokerage account of the 1990s – having to complete transactions with little to nothing in 

the way of trading tools, stock screeners, and education.The second alternative would, in 

all probability, result in transitioning many IRAs from a strictly transaction-based 

payment structure to an asset fee-based model. Clearly, both alternatives appear to be 

inconsistent with the result the Department is trying to achieve – serving the best interest 

of the IRA investor. 

IRA investors need, and have become quite accustomed to, ready access to information, 

education and alternative solutions. The Department’s proposed definition of fiduciary is 

so overly broad that even call center representatives would not be able to answer the 

simplest of questions about IRA rollovers without falling within the definition of 

fiduciary and triggering all of the best interest contract exemption (“BICE”) implications. 

The effect of the Proposal would be to severely limit information, education and 

affordable choices that such investors currently have. 

To be sure, IRA investors come to brokerage firms online, by phone and in-person visits 

to branch offices to discuss various products and services, the many investment options 

available to them, and financial investment education. The Department’s Proposal would 

certainly result in extremely limited, or worse, non-existent support conversations (even 

those initiated at the 

request of self-directed retirement investors) at critical times of need. Such support 

currently is offered at very little or no cost. Absent that support, I have reasonable cause 

to believe that future retirees such as myself would be required to either incur additional 

expense to meet their essential retirement-planning needs, or much worse, choose to 

remain ignorant about the risks of their investmenet decisions. This would not be good 

public policy. 

Furthermore, without any support, tools or education as to the benefits of keeping their 

assets in the retirement system (either in a vehicle such as a defined-benefit retirement 

plan or in a new IRA rollover), IRA investors’ leakage of assets from the retirement 

system would accelerate. This will result even though the best intentions of the 

Department are to enhance and improve the regulatory protections available to IRA 

investors and to encourage retirement savings. See, Wyman, Oliver, “The Role of 
Financial Advisors in the U.S. Retirement Market,” dated July 10, 2015 (Available 

at:http://fsroundtable.org/wp-content/uploads/2015/07/The-role- of-financial-advisors-inthe-US-retirement-market-Oliver-Wyman.pdf) (Last Visited on September 15, 2015). 

C. 

The Department's proposed limited list of permitted assets which, notably, 

excludes options, amounts to a solution searching for a problem, and is, thus, 

very harmful to IRA investors including those retirees who rely on premiums 

earned from selling call options fully-secured by stock ownership to 

supplement their income. 

In what appears to be the first time in its history, the Department is proposing a limited 

list of permitted assets. IRA investors such as myself currently have a wide choice of 

investments for their IRAs, many of which are not included in the Department's proposed 

list. And those not included may be used for important risk mitigation and investment 

diversification purposes. One glaring exclusion is exchange-trade call and put options. 

IRA investors understand that a tax-deferred investment account is the ideal place to 

generate income from a stock portfolio; options when coupled with sound education and 

brokerage firm investor qualification processes can be used to minimize the risks 

associated with investing in stocks. See, the comments offered by Ms. Ellen L. S. 

Koplow, Executive Vice President and General Counsel, TD Ameritrade Holding 

Corporation dated July 21, 2015 (Available at: http://www.dol.gov/ebsa/pdf/1210-AB32-

2-00743.pdf) (Last Visited on September 15, 2015). 

Moreover, without the ability to trade options in an IRA, current as well as future retirees 

would lose the ability to protect an overall stock portfolio, or for that matter, an 

investment in a particular company's stock by, for example, purchasing exchange-traded 

put options for downside protection. Viewed another way, this is is in the nature of “stock 

insurance.” 

EXAMPLE: IRA Investor owns 100 shares of Apple (AAPL: NYSE) which closed 

at $116.28 per share as of Tuesday, September 15, 2015 at 4:00 P.M. Eastern 

Time, and wishes to purchase “stock insurance” in the way of one (1) put 

contract for $110.00 per share for the next three (3) months, that is, until 

Friday, December 18, 2015, in exchange for paying a premium in the sum of 

$4.98 per share. As a result, the IRA Investor is guaranteed to receive no less 

than $105.02 per share times 100 shares ($110.00 per share protection less 

the $4.98 per share premium paid) which equals $10, 502.00 through Friday, 

December 18, 2015, for each put contract purchased. 

Similarly, by selling exchange-traded call options secured by stocks, an IRA investor can 

attain the benefit of maintaining an investment in stocks while generating income. This 

affords the investor some downside protection. 

EXAMPLE: IRA Investor owns 100 shares of Apple (AAPL: NYSE) which closed 

at $116.28 per share as of Tuesday, September 15, 2015 at 4:00 P.M. Eastern 

Time, and wishes to sell one (1) call contract covered by the 100 shares owned 

which allows another investor the right but not the obligation to purchase the 

100 shares for no more than $120.00 per share through Friday, December 18, 

2015, in exchange for the other investor paying the IRA Investor a premium in 

the sum of $5.30 per share. If Apple is trading above $120.00 per share by 

Friday, December 18, 2015, the IRA Investor will have to deliver the 100 
shares to the investor purchasing the call option contract, but the IRA Investor 

will get to keep the premium received. If Apple is trading below $120.00 per 

share as of Friday, December 18, 2015, it is likely that the IRA Investor will get 

to keep both the 100 shares of Apple stock as well as the premium received 

from having sold one (1) call option contract. In this example, the IRA investor 

generated income of $530.00 on the current market value of the 100 shares of 

Apple stock in the sum of $11, 628.00, for having committed to deliver such 

shares to another investor during a three (3) month period of time. 

Furthermore, an IRA investor can sell exchange-traded put options secured by cash with 

the aims of generating income and purchasing a stock at a price lower than the current 

market price. Here again, the investor would attain downside protection. 

EXAMPLE: IRA Investor wishes to generate income in exchange for committing 

to purchase 100 shares of Apple (AAPL:NYSE) for $110.00 per share, which is 

$6.28 per share less than Apple's closing price of $116.28 per share as of 

Tuesday, September 15, 2015 at 4:00 P.M. Eastern Time, through Friday, 

October 23, 2015, in exchange for receiving a premium in the sum of $2.69 per 

share. IRA Investor also wishes to buy 100 shares of Apple at a discount from 

its current market price. IRA Investor will need to secure the commitment 

with cash in the sum of $10,731.00 (Commitment to purchase at $110.00 per 

share, less premium received of $2.69 per share, equals $107.31 per share 

times 100 shares). If Apple is trading at or below $110.00 per share as of 

Friday, October 23, 2015, then IRA Investor will have to deliver cash in the 

sum of $10,731.00 out of the IRA in order to honor the obligation to purchase 

100 shares of Apple stock but gets to keep the $2.69 per share in premium 

received totaling $269.00. If Apple is trading above $110.00 per share as of 

Friday, October 23, 2015, then in all probability IRA Investor will get to keep 

both the cash set aside to honor the commitment to purchase 100 shares of 

Apple stock through said date plus the premium already received. 

NOTE: THE FOREGOING EXAMPLES DO NOT ACCOUNT FOR OR INCLUDE 

BROKERAGE COMMISSIONS/TRANSACTION COSTS. 

III.

THE BOTTOM LINE 

The bottom line is: quite apart from the Department's disturbing failure to comply with 

the requirements of the RFA because of a deficient IRFA in its current Proposal, the 

Department's broad definition of “fiduciary,” coupled with its a rather extraordinary 

measure excluding exchange-traded call and put options from its proposed permitted list 

of assets would be harmful to IRA investors. This is so because it will surely result in 

increased costs to investors like myself, who have smaller investment accounts. Further, 

excluding options from the proposed list would lead to less tools to defend against market 

forces which undoubtedly impact stock portfolios, and substantially curb retirees' ability 

to supplement their income. This would not be good public policy; on the contrary, it 

would defeat the very purpose of protecting current as well as future retirees' savings. 

IV. RECOMMENDATIONS 

For the reasons set forth above, I recommend the Department take the following action: 

First, I respectfully renew my request that the Department prepare a Supplemental IRFA 

and conduct hearings thereon before proceeding with its Proposal. Here again, I concur 
with the position and recommendation advanced by the SBA's Advocacy General 

Counsel. 

Secondly, assuming that the Department proceeds with its current Proposal with or 

without a Supplemental IRFA, it should substantially narrow its proposed definition of 

the term “fiduciary,” in a manner that is reasonably-calculated to uphold, preserve, and 

protect IRA investors' current unrestricted access to, and enjoyment of, free or low cost 

investment data, tools, research, education and support services. Moreover, I concur with 

the position and recommendation advanced by Mr. Christopher Gilkerson, Senior Vice 

President and General Counsel, and Ms. Gail B. Mayland, Vice President and Associate 

General Counsel, Charles Schwab, in the filed comments dated July 20, 2015, at pp. 8-10 

(Available at: http://www.dol.gov/ebsa/pdf/1210-AB32-2-00571.pdf) (Last Visited on 

September 15, 2015). 

Finally, and most importantly, the Department should include exchanged-traded call and 

put options on the list of permitted assets contained in the final rule. Here again, I concur 

with Charles Schwab's recommendation as set forth in the a foregoing comments at 

Exhibit 1, id, at pp. 24-25. See also, comments of Mr. Craig S. Donohue, Executive 

Chairman, Options Clearing Corporation (“OCC”) dated July 17, 2015, at pp. 2-3 

(Available at: http://www.dol.gov/ebsa/pdf/1210-AB32-2-00420.pdf) (Last Visited on 

September 15, 2015). 

Thank you, again, for the opportunity to comment on the Department's Proposal. 

Yours truly,

David M Luce