am, The Commonwealth of Massuchusetts
keretary, Of the Commonwealth
Jtate House, boston, Massachusetts, 02188

Wilkum Francis Galvin
Secretary of the Commonevealeh

May 19, 2010

Ms. Phyllis C. Borzi

Assistant Secretary

Employee Benefits Security Administration
Room N-5655

United States Department of Labor

200 Constitution Avenue, NW
Washington, D.C. 20210

Re: EBSA, 29 CFR 2550, RIN 1210-AB35, “Investment Advice -- Participants and
Beneficiaries,” Proposed Rule; and EBSA, 29 CFR Parts 2509, 2520, and 2550, RIN
1210-AB33, “Request for Information Regarding Lifetime Income Options for
Participants and Beneficiaries in Retirement Plans”

Dear Ms. Borzi:

This letter is in reference to two requests for public comments relating to 401(k)
and similar retirement plans and Individual Retirement accounts (“IRAs”) recently
published by the U.S. Department of Labor: (1) Employee Benefits Security
Administration, 29 CFR 2550, RIN 1210-AB35, “Investment Advice -- Participants and
Beneficiaries,” Proposed Rule; and (2) Employee Benefits Security Administration, 29
CFR Parts 2509, 2520, and 2550, RIN 1210-AB33, “Request for Information Regarding
Lifetime Income Options. for Participants and Beneficiaries in Retirement Plans,”
Request for Information.

The Office of the Massachusetts Secretary of the Commonwealth enforces the
Massachusetts Uniform Securities Act, and it includes the Massachusetts Securities
Division. As such, the Secretary of the Commonwealth is the chief securities regulator
for Massachusetts.


In my roles as a public official and securities regulator I hear regularly from
members of the public who are seriously concerned about protecting their retirement
savings and getting an appropriate return on those assets. As the Department is aware,
for those households that have accumulated any retirement savings, the majority of such
assets are 401(k)-type! and IRA accounts. Working people have typically sacrificed to
accumulate retirement savings, so it is understandable that they will want to protect those
assets, and will be wary about any changes in the rules relating to those accounts.

1) Investment Advice in Connection with Retirement Accounts. We are
supportive of the Department’s efforts to provide basic investment advice to the holders
of retirement accounts.

Based on the kinds of misconduct we have seen securities salespeople engage in
and the Securities Division’s enforcement actions, we share the Department’s concerns
about the conflicts of interest that arise from the varying levels of compensation payable
for different investment products. In many cases, bad sales and advisory practices are
driven by the structure of compensation. Unfortunately, some brokers and advisers will
recommend inappropriate products precisely because they generate high commissions
and fees.

We urge that anyone providing such investment advice must always be held to the
highest fiduciary standard. In the context of securities law, investment advisers have a
fiduciary duty to their customers, not just the obligations of fair dealing and suitability
that brokers currently must meet. It is particularly important to hold all advisers to a
fiduciary standard when retirement assets are at stake, because most investors would not
be able to recover from a loss of their retirement assets.

As the Department of Labor is undoubtedly aware, there are now proposals under
active consideration to require that all financial professionals, both investment advisers
and broker-dealers, be true fiduciaries to their customers. In many cases, customers do
not have a clear understanding of whether they are dealing with an investment adviser or
a broker-dealer or whether their financial professional is a fiduciary

My office supports initiatives to require financial professionals to be fiduciaries
to their customers, particularly for professionals who deal with individual investors and
with less sophisticated investors like municipalities and public entities. The Chair of the
U.S. Securities and Exchange Commission, Mary Schapiro, has also gone on record
urging that both investment advisers and broker-dealers providing the same advisory
services should meet the same high fiduciary standard, especially for retail investors.”

"Including Sec. 403(b) plans for employees of non-profit entities, and Sec. 457 plans for employees of
governmental entities.

? Speech by SEC Chairman, Keynote Address at the Compliance and Legal Society of the Securities
Industry and Financial Markets Association 2010 Annual Seminar, May 6, 2010,
http://www.sec.gov/news/speech/2010/spch050610mls.htm



2) Annuitization of Retirement Funds. We commend the Department for taking
on the complex issues of preventing retirees from running out of money during
retirement. Based on lengthening life spans, increasing costs of living, and the
diminishment of traditional retirement resources, particularly Social Security and defined
benefit pensions, we can expect to see a growing trend of retirees outliving their
retirement assets.

We note that, at this time, an annuity may not be an effective tool to create a
stream of revenue to support retirees. The payouts from fixed annuities are substantially
based on prevailing interest rates, and in the current low interest rate environment those
payouts will tend to be low.

Annuities can also be problematic because they are often complex, high-
commission, and high-fee products. The Securities Division has seen multiple instances
where securities salespeople and advisers have sold older customers annuity products,
particularly variable annuities, that were unsuitable for them. My office has taken
enforcement action in several such cases.’ All too often, the high selling compensation
payable for these annuities drove these inappropriate recommendations.

We appreciate this opportunity to comment on the important issue of protecting
investors’ retirement assets. We particularly urge the Department to be vigilant about
conflicts of interest on the part of advisers and the sponsors of financial products.

If you have questions about this letter or my office can assist in any way please
contact me or Bryan Lantagne, Director, Massachusetts Securities Division at (617) 727-
3548

Very truly yoyfty, c

Tibi F. Galvin
Secretary of the Commonwealth

Commonwealth of Massachusetts

? In the Matter of Citizens Investment Services Corp., Docket No E-2004-0050,
http://www.sec.state.ma.us/sct/sctcit/citidx.htm ; In the Matter of Investors Capital Corporation, E-2005-
0090, In the matter of Steven Michael Anzuoni and Fairway Financial Insurance, Inc. Docket No. E-2007-
0026, http://www.sec.state.ma.us/sct/sctanzmal/anzuoni_complaint.pdf