The securities industry, which has been gearing up for battle with the Department of Labor over its proposed higher fiduciary standard for retirement plan advisers, was hit with a litany of last-minute requests in December that they say may cause further delays.
A revision of the proposal was expected to be released early this year. That now looks unlikely after a December 15 letter the Department of Labor sent to a number of trade groups asking for reams of detailed data from their members on customer IRA accounts over the past 10 years.
The department gave the groups exactly one month to hand over the data involving what some industry insiders say could amount to tens of thousands of accounts.
In its letter, reviewed by Reuters, the Department of Labor Department asks for an array of data, such as performance returns and any commissions and fees for each investment held over a 10-year period.
The department also asked for information on the nature of advice the investor received. For example, the letter asks for what kind of recommendations the adviser made and whether the advice was solicited. Also requested: specific information about each investor such as levels of financial sophistication, risk tolerance, and the length of the client-adviser relationship.
They are asking for an inordinate amount of data that is impossible to get, said one executive at a broker-dealer who saw the letter but did not want to be named. It is so extreme that it seems like they just put out the request to say that they tried.
Trade groups including The Investment Company Institute, the American Council of Life Insurers, the Securities Industry and Financial Markets Association -- which represents hundreds of broker-dealers, banks and asset managers -- and the Financial Services Institute, an independent broker-dealer organization, received the December 15 letter.
The request comes more than six months after industry groups pressed the Department of Labor for a deeper analysis of the costs and benefits related to the rule. Now, those same groups say the department is asking for too much, too soon.
A Department of Labor spokesman decline to immediately comment.
Securities industry observers are concerned that the industry's pushback after requesting the analysis in the first place is an attempt to delay the regulation.
A CONTINUING BATTLE
Last fall, many in the securities industry claimed victory when the Department of Labor pulled its initial proposal to impose a higher fiduciary standard of care on advisers serving retirement plans. The new standard would also would affect those who provide advice about IRAs to individual investors.
Financial advisers who work for brokerages were concerned the rule would prevent their firms from collecting fees from some securities issuers for promoting those products. Labor is concerned that the practice, known as revenue sharing, can sway advisers to recommend them to IRA investors, even when those products are not in the client's best interest. But many advisers wouldn't be able to earn enough money to continue providing IRA advice without that additional compensation, they say.
But the Department of Labor was quick to say that it planned to re-propose its rule and that IRA advice would be part of it. The department agreed to conduct a cost-benefit analysis of the IRA portion, a demand made in many of the more than 300 letters last year.
Phyllis Borzi, assistant secretary of the Labor Department's Employee Benefits Securities Administration, and chief architect of the proposed rule, told Reuters last year that the reproposed rule would be out early this year.
The goal of the data inquiry is to help with the cost-benefit analysis and to determine the impact of potential conflicts that may affect how advisers sell IRA, according to the letter.
SIFMA and the American Council of Life Insurers plan to request meetings with the Department of Labor to discuss the request, officials at both groups said.
Critics like Barbara Roper, director of investor protection for the Consumer Federation of America say asking for a cost benefit analysis is becoming a popular stalling tactic by the industry to stop or weaken proposals they don't like.
While the fiduciary rule proposal may not come out as soon as anticipated, Roper doesn't think the Department of Labor will back off its aim of a higher standard for IRA advice.
I think the agency will move heaven and earth to get this rule done, she said.
(Reporting by Jessica Toonkel and Suzanne Barlyn, editing by Jennifer Merritt)