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Liberty |
Capital
Investment Corporation 1800 SW First Ave., Suite 150, Portland, OR 97201
(503) 225-9393 * Fax (503) 225-6532

Department of Labor 12/21/2010
RE: Definition of Fiduciary Proposal Rule

The proposal by the DOL to expand fiduciary status as stated would in effect mean that
every investment broker and RIA presenting investment recommendations to current or
prospective IRA clients would become fiduciaries.

The first problem with the proposed rule change is the term “fiduciary” (or prudent man
tule) is a very broad term that is poorly defined legally. According to comments from.
legal counsel, the interpretations of the fiduciary or prudent man rule are broad enough
“to drive a truck through”. That in no way is an improvement upon the current
responsibility that brokers/RIA’s follow the client objectives and suitability rules already
in place through FINRA and the SEC.

This is a far reaching rule change that in essence takes investment choice away from
brokers responding to stated client objectives in asset recommendations. Instead
brokers/RIA’s must look first to generic “prudent man” considerations without a clear
definition of what it means. “Prudent” investing could mean not only being too
aggressive, but could also imply not being aggressive enough.

Clients often have a number of retirement accounts and those accounts are not necessarily
intended to accomplish the same objective. One might be highly conservative and
another very aggressive. According to the “prudent man” rule, an investor who might by
age or other consideration, generally fit into the conservative class but wanted to have a
small portion of assets in a more aggressive position, not be able to do so. A broker
would have to refuse to do the kind of business being requested because of concern for
litigation either by the client or a beneficiary if the aggressive position was not
successful.

This rule would be a litigation nightmare for all concerned. Because the term fiduciary is
so poorly defined, it would open the door to litigation by any IRA investor who lost
money. Consider the potential litigation, whether rightful or not, that might have come
out of the markets of 2008.

A second piece of the litigation nightmare comes from the fact that beneficiaries as well
as IRA owners can sue for damages. In other words, the broker/RIA must not only
consider the client’s “prudent man” issues, but must also be concerned about whether a
beneficiary might view the account performance differently.

If brokers/RIAs are to be held to a higher standard, then it rests upon FINRA to both
define and educate the investment community as to the specifics of the Fiduciary

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standard we are to play and how to implement it effectively. Also, if brokers and RIAs
are to be held to a higher standard, it implies that they should be able to charge clients for
that increased responsibility. Having the new role as Fiduciary would also imply that
there would be a whole new tier of regulation and review needed to be implemented.

For all of the reasons above, it is my sincere hope that neither the SEC or FINRA support
the adoption of broker/RIA as a Fiduciary on retirement accounts. The term Fiduciary
adds nothing positive to the protection of clients but it does add the need for a
boondoggle of interpretive rules and regulations that will never be clear.

Respgetfully, ,7

WG,
Cand

1800 SW‘First Ave. Suite 150
Portland, OR 97201