September 24, 2015

Office of Regulations and Interpretations

Office of Exemption Determinations

Employee Benefits Security Administration

U.S. Department of Labor

200 Constitution Avenue, N.W.

Washington, D.C. 20210

Re: Conflict of Interest Rule, RIN 1210-AB32

Definition of the Term “Fiduciary”; Conflict of Interest Rule – Retirement 

Investment Advice

Ladies and Gentlemen:

We are writing as organizations that strongly support the Department of Labor’s efforts 

to strengthen protections for working families and retirees by requiring the financial 

professionals they turn to for retirement investment advice to act in their best interests. The 

Department’s conflict of interest rule proposal would achieve that goal by closing loopholes in 

the definition of fiduciary investment advice while simultaneously easing restrictions on the 

types of compensation financial firms can receive so long as they abide by appropriate regulatory 

restrictions. Chief among these are requirements to act in the best interests of their customer and 

avoid compensation and other practices that conflict with that goal. The result is a balanced rule 

that provides much needed new protections for retirement savers while providing the flexibility 

necessary to enable well-meaning firms operating under a variety of business models to comply.

We recognize that adjustments to the rule will be adopted before it is finalized to clarify 

certain provisions and streamline implementation. We are concerned, however, that many of the 

proposals put forward by industry groups in the name of making the rule more “workable” would 

significantly reduce the rule’s key investor protection benefits. These include proposals to 

reopen loopholes in the definition of fiduciary investment advice, water down the best interest 

standard, and seriously weaken or even eliminate requirements to mitigate conflicts of interest 

that can lead financial advisers to steer retirement savers into high-cost or high-risk investment 

products. We urge you to reject such proposals as inconsistent with the interests of retirement 

investors and as insufficiently protective of the rights of participants and beneficiaries of plans 

and IRA owners.

Our specific comments follow.

Don’t inappropriately narrow the definition of investment advice

We strongly support the Department’s proposed changes to the definition of investment 

advice to close loopholes in the definition that have enabled financial firms to evade their 

responsibility to act in the best interests of their customers when providing retirement investment 

advice. The broad definition of investment advice proposed by the Department is consistent with 

the statutory language under ERISA, the securities law definition of investment advice, and the 
reasonable expectations of workers and retirees who turn to financial professionals for help with 

their retirement investments. A number of industry commenters have suggested revisions to the 

definition that would inappropriately narrow that definition. These include, for example, 

suggestions to: (1) reintroduce the requirement that there be some sort of mutual agreement that 

the advice is specifically individualized for or that it is intended to be relied on as unbiased and 

in the best interests of the advice recipient; (2) extend the seller’s carve-out to the retail market; 

or (3) exclude from the definition rollover recommendations that don’t include specific 

investment recommendations. We urge you to reject these and similar proposed changes, which 

would, while using different regulatory language, have the effect of recreating the very loopholes 

the rule is intended to close. 

Don’t water down the best interest standard or weaken requirements to rein in conflicts of 

interest

In drafting its proposed rule, the Department loosened restrictions on the types of 

compensation that firms can receive when providing retirement investment advice. In order to 

protect against the potential harm to retirement savers from the conflicts of interest associated 

with these payments, the Department imposed a strong set of investor protections, including first 

and foremost, an obligation to act in the best interests of the customer. The Department 

recognized, moreover, that to be effective in constraining abusive conduct, the best interest 

standard must be backed by meaningful restraints on industry practices that work against 

customer interests. As such, while it allows firms to receive conflicted compensation, it requires 

them to take steps to limit or ban other practices that can exacerbate those conflicts, such as 

setting quotas or paying advisers more to encourage the sale of certain products regardless of 

whether they represent the best option for the customer.

These requirements, which are crucial to the rule’s effectiveness, have received strong 

push-back from industry groups seeking to maintain the status quo. Some have argued that the 

portion of the best interest standard that requires advisers to set aside their own interests when 

determining the best course of action for the customer (the “without regard to ...” language) 

should be eliminated. Others have objected to the requirement that differential compensation be 

based exclusively on objective factors. And still others have suggested that conflicts be 

addressed exclusively through disclosures. We strongly urge you to reject these proposed 

changes. If financial firms remain free to compensate and reward advisers for recommendations 

that are not in the customers’ best interests, retirement savers are likely to see only minimal 

benefits from the rule proposal.

Don’t create an exemption for advice to “sophisticated” investors

A new issue that emerged during the comment process is a suggestion that there should 

be a carve out of the rule for “sophisticated” investors so that firms would be free to offer 

financial advice to these investors without triggering a fiduciary duty. Those who advocate this 

approach suggest the securities law “accredited investor” definition as an appropriate basis for 

such an exemption. But it has long been recognized that the existing accredited investor 

definition, which is based on income and net worth thresholds, does not accurately measure 

financial sophistication or even the ability to withstand investment losses. Because industry has 
successfully resisted efforts to adjust those thresholds for inflation, the definition is almost 

certain to get less protective in the future as the value of the thresholds continues to erode. It is 

worth noting, moreover, that the Investment Advisers Act contains no such carve out from the 

fiduciary protections for any individuals, or even institutional investors. Under the securities 

laws, investment advisers have a fiduciary duty to all their clients.

While some financially sophisticated individuals may choose to make their own 

investment decisions, others turn to financial advisers for help. Regardless of their income or net 

worth, individuals who turn to a financial professional for investment advice deserve the 

assurance that the advice they receive will be based on their own financial interests, rather than 

those of the financial professional. This is particularly true in the context of advice about 

retirement savings, where accounts are tax-subsidized and the decisions made can determine an 

individual’s ability to afford a secure and independent retirement.

* * *

American workers now are responsible for making the investment decisions that will

determine their financial well-being in retirement. In doing so, they face a menu of complex,

often difficult-to-understand investment options. Many people understandably seek out 

investment professionals for advice on how to maximize their savings so that they may one day 

retire with dignity. Tragically, because of loopholes in the current rules, the professionals they 

turn to for advice may be influenced by financial conflicts of interest and make recommendations 

that are not in the retirement investor’s best interest. 

Hardworking Americans lose precious savings when they receive advice to purchase 

investments with high fees, low returns, and excessive risks. Remedying this situation is 

critically important to the retirement security of millions of Americans. Importantly, it is small 

account holders and lower- and middle-income retirement savers who stand to benefit most from 

closing loopholes and updating the rules. We commend the Department of Labor for your 

commitment to advancing this rulemaking and urge you to reject recommendations that simply 

will leave the current situation unchanged.

Sincerely,

American Association of University Women (AAUW)

American Federation of State, County and Municipal Employees 

Americans for Financial Reform

Association of University Centers on Disabilities

Center for Responsible Lending

Committee for the Fiduciary Standard

Consumer Action

Consumer Federation of the SE

Department for Professional Employees, AFL-CIO

Fund Democracy

International Brotherhood of Boilermakers, Iron Ship Builders, Blacksmiths, 

Forgers, and Helpers
International Union of Steel, Paper and Forestry, Rubber, Manufacturing, Energy, 

Allied Industrial & Service Workers 

Leadership Conference on Civil and Human Rights

Main Street Alliance

Metal Trades Department, AFL-CIO

National Association of Social Workers

National Committee to Preserve Social Security and Medicare

National Council of La Raza

National Organization for Women

National Women’s Law Center

Public Citizen

Service Employees International Union

Social Security Works

U.S. PIRG

Wider Opportunities for Women