Trust Updates Archive

Fiduciary definition service providers brokers SEC EBSA DOL ERISA Trust Regulatory News A.M. Publishing Garbo The “F” Word Stirs Up Emotions

(April 5, 2011 --Chicago, IL) -- Ambiguous language and fear of future litigation are raising concerns among trust bankers regarding regulatory proposals to broaden the definition of what constitutes a “fiduciary.”

“The scope and generality of the proposed regulations will cause functions previously considered ministerial to become fiduciary functions, forcing service providers to consider the offering of the services and related fees to address the increase in risk and oversight requirements,” Karen Prange, Assistant General Counsel, J.P. Morgan Chase, said in recent testimony beforetje U.S. Department of Labor.

The DOL proposal most directly impacting trust bankers, received more than 200 written comments. A second fiduciary proposal is under consideration by the U.S. Securities and Exchange Commission.

The SEC’s simultaneous proposal to broaden its definition of who is a fiduciary also is raising industry concerns, though less so among trust bankers. The SEC’s actions are being driven by the requirements in Dodds-Frank financial reform legislation.

While the SEC says it hopes to “harmonize” the two proposal, the DOL says it will neither defer to the SEC definition nor wait for it.

“If we wait, then the pressure will be on us to simply abide by SEC rules,” Phyllis C. Borzi, Assistant Secretary, DOL Employee Benefits Security Administration, recently stated.

When asked recently if it was “fair” to ask companies to exist in two parallel fiduciary universes, Borzi responded, “it’s quite common for an entity to be subject to multiple legal regimes. … it’s just the way things are.”

At the DOL’s public hearings on March 1 and 2, some 40 groups sought to testify. The DOL announced at those hearings that it was extending the time for commenting on the proposal. Click here for a transcript of the March 1 hearing and for the March 2 hearing.

No statement in this issue is offered as or should be construed as legal opinion or advice or as an indicator of future performance.
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