Compliance March 1, 2011

SPARK Urges EBSA to Step Carefully with Fiduciary Rule

Larry H. Goldbrum, General Counsel of The SPARK Institute, said any changes to the definition of fiduciary should not be overly dramatic changes in policy.
Reported by

Goldbrum said the Department of Labor’s Employee Benefits Security Administration (EBSA) should rework its current proposed rule and re-release it.  “We urge EBSA to take measured steps in changing the definition of fiduciary and what constitutes investment advice for retirement plans,” Goldbrum testified, according to his prepared remarks. “We believe that significant changes to the Proposal are needed and that the retirement plan community would benefit greatly if EBSA reproposed a modified rule.”

Goldbrum touched on one theme also dealt with by other witnesses – that whatever EBSA decides to do, the rule should be as precise as possible and include as much guidance as possible for practitioners trying to implement. “Any change to the definition of fiduciary must be clear and precise. It is crucial that service providers are able to structure their products, services, and compensation arrangements with reasonable certainty about whether they will be a fiduciary with respect to a plan.” Goldbrum declared. “Absent clear and precise guidance, service providers will be at substantial risk of unintentionally and unwillingly becoming fiduciaries and engaging in prohibited transactions. Unfortunately, the Proposal includes broad changes that are unclear and will result in substantial unintended consequences.”

For more stories like this, sign up for the PLANADVISERdash daily newsletter.

Goldbrum warned that lawyers who have filed numerous lawsuits in recent years over allegations of excess plan fees and other issues will likely continue flocking to the retirement plan space because of the new rule. “Service providers should not be subject to the significant risk that an arrangement to provide non-fiduciary products and services will be treated, after the fact, as a fiduciary services arrangement,” Goldbrum testified. “Class action attorneys have discovered retirement plans as potentially fertile grounds for large settlements from perceived deep pocket defendants, typically large plan sponsors and service providers. Although these lawyers have had limited success on the merits of their cases, an increased threat of litigation, and the costs associated with defending against them, will have a significant chilling and negative effect on the retirement plan community.”

Finally, Goldbrum repeated a warning regulators had heard from other witnesses – that many providers will exit the retirement plan space rather than take the chance of running afoul of the new fiduciary rules.

Goldbrum’s remarks are here.

The Markets March 1, 2011

REITs Strongly Outperform the Broader Market

The U.S. REIT market significantly outperformed the S&P 500 through February, according to the National Association of Real Estate Investment Trusts (NAREIT).
Reported by

The FTSE NAREIT All Equity REITs Index was up 8.90% and the FTSE NAREIT All REITs Index gained 8.29% in the first two months of 2011 compared to 5.88% for the S&P 500. The FTSE NAREIT All Equity REITs Index was up 4.58% and the FTSE NAREIT All REITs Index was up 4.49% in February compared to the S&P 500’s 3.43% gain.  

On a 12-month basis ended February 28, 2011, REITs strongly outperformed the S&P 500, with the FTSE NAREIT All Equity REITs Index up 39.54% and the FTSE NAREIT All REITs Index up 37.96% compared to the S&P 500’s 22.58%.  

Want the latest retirement plan adviser news and insights? Sign up for PLANADVISER newsletters.

All sectors of the REIT market showed solid gains in the first two months of the year, with some sectors significantly outperforming the overall REIT indexes. According to the report, top performing sectors were Timber, up 21.89% in the first two months of the year (up 4.10% in February); Commercial Financing, up 19.46% in the first two months (up 16.53% in February); and Industrial, up 12.60% in the first two months (up 8.23% in February).  

Gains in other major sectors included Office REITs, which were up 8.35% in the first two months (up 2.28% in February). Retail REITs were up 7.38% in the first two months (6.51% in February) led by Regional Malls, up 8.94% in the first two months (8% in February). Apartments were up 6.5% in the first two months (3.91% in February).  

On a 12-month basis ended February 28, top performing sectors were Commercial Financing, up 60.62%; Apartments, up 52.85%; and Lodging/Resorts, up 47.53%.  

REITs also continued to deliver strong yields for income investors. The FTSE NAREIT All REITs Index delivered a 4.12% yield at February 28 compared with 3.41% for 10-year U.S. Treasuries.

«