Labor Department's Borzi defends data request

Reuters News
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Posted: Jan 09, 2012 12:43 PM

By Suzanne Barlyn and Jessica Toonkel

(Reuters) - An official at the Department of Labor acknowledged that it may not be feasible for securities industry groups to immediately provide all of the data it requested for use in a cost-benefit analysis it is conducting.

The department had requested the data on December 15 and gave firms one month to deliver it. The information is supposed to help inform a controversial re-proposal of a rule that would impose a higher fiduciary standard of care for retirement plan advisers.

Phyllis Borzi, assistant secretary of the Department of Labor's Employee Benefits Securities Administration, acknowledged in a statement to Reuters that some of the information "may not be readily available within the requested time frame."

The Department of Labor is assembling "a wide array of evidence on this question," said Borzi, the proposal's chief architect. "The expansiveness of the data request reflects our effort to ensure that we have access to all of the best available evidence."

She is defending the request for reams of detailed data it sent to a number of trade groups while recognizing that firms may not be able to timely comply with the request.

Labor's request was a response to complaints from industry critics who lamented that an initial rule it proposed in October 2010 "had not adequately demonstrated or quantified the harm that can arise when investment advisors' interests conflict with those of the IRA owners they advise," said Borzi, in a statement sent to Reuters late Friday.

The Department of Labor withdrew that proposal in September, after industry groups and lawmakers expressed continued concerns about costs to the industry and whether the new rule would clash with a separate fiduciary proposal expected from the U.S. Securities and Exchange Commission. Officials said they expected to issue a revised proposal early this year.

In its letter, reviewed by Reuters, the department asks for an array of data, such as performance returns and information on commissions and fees for each investment held over a 10-year period. Some industry insiders say the request could mean reviewing tens of thousands of accounts.

The data request is the latest salvo in an ongoing battle over the Department of Labor's effort to impose a higher fiduciary standard of care on advisers serving retirement plans. The new standard would also would apply to those who provide advice about IRAs to individual investors. Many advisers are concerned the proposal will limit the types of fees they can collect for servicing IRA accounts and ultimately prevent them from continuing to provide that advice.

Some industry observers see the securities industry's insistence on a cost-benefit analysis as a stalling tactic.

"Whenever anyone in D.C. opposes something, they always ask for cost benefit analysis. At the same time, if they're for something, they never ask for it," said Lynn Turner, former SEC chief accountant.

One major trade group insists there are no ulterior motives. "We are not trying to stall the process, but we do want the Department to undertake the necessary analysis to determine whether such a regulatory change is beneficial to the millions of IRA holders who are trying to save for their retirements," said Lisa Bleier, managing director of the Securities Industry and Financial Markets Association (SIMFA), which represents hundreds of broker-dealers, banks and asset managers, in an e-mail.

"If the increased costs to individual investors are as great as we anticipate, then the Department should consider greatly reforming their rule to help individual investors as oppose to making saving for retirement more difficult," she said. SIFMA expects to submit a request this week to meet with Labor to discuss the details of the December 15 letter.

Other trade groups that received the letter include The Investment Company Institute, the American Council of Life Insurers, and the Financial Services Institute, an independent broker-dealer organization.