The Labor Department is delaying a rule designed to make investment advisors more accountable for the advice they give to employers and individuals in retirement plans, Assistant Secretary of Labor Phyllis Borzi said in a conference call Monday.
"We honestly weren't as clear as we could have been and we're trying to fix that," said Borzi.
Concerns from private companies such as Morgan Stanley that manage 401(k) plans and investments in IRAs and from legislators caused the Labor Department to rethink the rule.
The extra time will enable the department to strengthen and clarify this "important consumer protection," she said.
The Labor Department wants to expand the scope of fiduciary responsibility to protect those saving for retirement from conflicts of interest.
Conflicts could surround the recommendation of investments with higher fees, for example.
The rule would require investment professionals who advise employers and workers in 401(k)s or IRAs to act in the best interest of their clients.
The original proposal may have caused financial firms to offer fewer investment options in retirement accounts and shift to a fee-based model used by investment advisors, which will raise costs, Kenneth Bentsen, executive vice president for public policy and advocacy at the Securities Industry and Financial Markets Association, said in July at a hearing before the House Subcommittee on Health, Employment, Labor and Pensions.
Rep. Barney Frank, top Democrat on the House Financial Services Committee, said in a letter Sept. 15 to Labor Secretary Hilda Solis that the agency should withdraw and repropose the rule after coordinating with the Securities and Exchange Commission and the Commodity Futures Trading Commission.
The SEC has been working on rules required by Dodd-Frank that may overlap with the Labor proposal. "People can look for a reproposal of this regulation at some point early next year," Borzi said. "That's my best guess."
