In April 2015, the Department of Labor (DOL) re-proposed regulations that amend the definition who is included in the definition of fiduciary for employee benefit plans and Individual Retirement Accounts (IRA’s) and with it limits the scope of compensation for advice for those fiduciaries . In 2010, the DOL had proposed regulation with similar intent – but it had too many critics on both sides of the aisle and in the industry to ultimately gain traction.

So far, occasional investment advisers to employee benefit plans and IRA’s have not been considered fiduciaries under ERISA (Employee Retirement Income Security Act) and/or applicable Internal Revenue Service (IRS) Code. If the regulations are adopted, most common investment advice to these retirement savers would constitute fiduciary investment advice. And as such, many of the common compensation agreements, such as revenue sharing, would no longer be acceptable as they would not comply with the accompanying Best Interest Contract Exemption, which put standards and obligations (including new disclosure obligations) for fiduciary investment advice in place and creates an avenue for retirement savers to bring claims. As the title implies, the guiding principle must be the best interest of the client, i.e. retirement saver, and that implies that fees for advice must be reasonable and leave rather more than less with the retirement saver’s nest egg than be spent on fees.

FINRA (Financial Industry Regulatory Authority, the industry’s self-regulating body) at this point only has a requirement for suitability, i.e. that advisers must only recommend financial products that are indeed suitable for their clients, their clients’ level of investment sophistication and their investment objectives, but FINRA does not address reasonableness of compensation mechanisms or possible conflicts of interest arising at the desk of a Broker/Dealer who may de facto function as an investment advisers to retirement savers.

A far-reaching proposal that has attracted the ire of many in the industry because it really threatens the status quo and existing income streams – $14 trillion of assets are governed under ERISA, indeed a sizable chunk of the market. Certainly, not all of those who are now deemed fiduciary investment advisers have been overcompensated in light of the new rules – and even Dennis Kelleher, the CEO of Better Markets, acknowledged that in his testimony in front of the House. Better Markets is an advocacy organization promoting “the public interest in the domestic and global capital and commodity markets. It advocates for transparency, oversight, and accountability in the financial markets.” But as more and more people rely on self-directed retirement savings options (read 401(k) and 403(b) plans), it is more than high time to put tighter standards in place.

Last week, a bill passed in the House that on the surface threatens the legs of the DOL’s proposal. But with all political log-rolling and reading the tea leaves, the voting records associated with the bill and the White House’s championing of the rule seem to indicate that the proposal will survive and benefit retirement savers in the near future.