ABA Letter to DOL re: Proposed Class Exemption: Improving Investment Advice for Workers & Retirees

Office of Exemption Determinations
Employee Benefits Security Administration
U.S. Department of Labor
200 Constitution Avenue, NW
Washington, DC 20210

Ladies and Gentlemen:

The American Bankers Association (ABA) appreciates the opportunity to provide comments to the Department of Labor (Department) on a proposed class exemption (Exemption) that would permit investment advice fiduciaries under the Employee Retirement Income Security Act of 1974, as amended (ERISA) and the Internal Revenue Code (Code) to receive compensation for rendering investment advice that would otherwise violate the prohibited transaction provisions of ERISA and the Code. The term “investment advice” is defined in relevant part by a Department regulation – known as the “Five-Part Test” – that has been reinstated as a result of a 2018 federal appellate court decision that vacated the Department’s previous amended rule on fiduciary investment advice. The Exemption would be available to financial institutions and investment professionals that provide investment advice for compensation to (i) any participant or beneficiary of a retirement plan (plan), (ii) any owner of an individual retirement account (IRA), and (iii) any fiduciary of a plan or IRA (collectively, retirement investors). The Exemption would require an investment advice fiduciary to adhere to conduct standards and protective conditions designed to safeguard the interests of retirement investors.

We commend the Department for its efforts to promote fiduciary investment advice that is intended to meet the needs of retirement investors while preserving the availability and variety of investment advice arrangements. We further concur with the Department that aligning the Exemption with the Securities and Exchange Commission’s (SEC’s) Regulation Best Interest facilitates consistency in the application of federal regulatory standards.6 The Exemption’sprovisions generally work toward achieving transparency and compliance certainty whileproviding exemptive relief that is broader than currently available exemptions. We thereforesupport approval of the Exemption, with recommendations for additional modifications asdescribed below that are intended to reasonably accommodate the distinct business models andthe unique legal and regulatory framework of the banking industry with respect to the provisionof investment advice. We further seek clarification of certain Department interpretations of theFive-Part Test that are contained in the preamble of the Exemption, as described herein.

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