Compliance

ASPPA Comments on Proposed Investment Advice Regulations

In comments to the U.S. Department of Labor (DoL) regarding its proposed investment advice rule, the American Society of Pension Professionals & Actuaries (ASPPA) has argued that regulators should not open the door to government involvement in judging acceptable investment theory.
Reported by Fred Schneyer

Craig P. Hoffman, ASPPA general counsel and director of Regulatory Affairs, asserted in a statement that the DoL went astray by asking for comment on what are “generally accepted investment theories.”

While pointing out that ASPPA is generally in favor of the proposed rule, Hoffman continued: “… we are concerned that the new proposal may unnecessarily interject government regulators into the role of investment advisor by dictating the parameters of what is acceptable in the realm of investment theory. We believe that job is better left to trained and experienced professionals who should be able to apply their considered expertise when either giving investment advice or creating computer models.”

The ASPPA letter contended that regulators need to focus more on a series of high-level “fiduciary values.” 

“Those values would include the need for portfolio diversification, investing for the long term, the payment of only reasonable fees for investment services and the need to keep potential conflicts of interest with respect to the advice given to a minimum,” the letter argued. “While particular investment strategies and products come and go, these core values remain the same and provide benchmarks against which all theories, styles and methodologies should be measured.”

The ASPPA letter was also submitted on behalf of its affiliated organizations, which include the Council of Independent 401(k) Recordkeepers (CIKR) and the National Association of Independent Retirement Plan Advisors (NAIRPA).

The ASPPA comments applauded the DoL’s decision to drop the administrative class exemption originally in the proposal on its initial release in 2009 (see “DoL Proposes Revamped Investment Advice Rule”). “We believe the exemption would have exposed participants and beneficiaries to conflicted investment advice without sufficient protection from the potential effect of an advisor’s conflicts of interest. Furthermore, the exemption was contrary to Congressional intent and we fully support its exclusion from the newly proposed rule,” ASPPA said.