On March 24, 2009, the Subcommittee on Health, Employment, Labor, and Pensions of the US House of Representatives' Committee on Education and Labor held a hearing called "Retirement Security: The Importance of an Independent Investment Adviser" to review the existing rules that govern financial advice administered to 401(k) and IRA participants. In particular, the Subcommittee sought to understand the current rules outlining how investment advice can be rendered to participants in participant-directed "401(k)" plans and to those with individual retirement accounts.1 The hearing was largely in response to final regulations of the Department of Labor, published in the Federal Register on January 21, 2009,2 the effective date of which has now been extended at least until May 22, 2009.3
The Subcommittee heard testimony conveying a wide range of viewpoints. One of those asked by the Subcommittee to speak at the hearing, White & Case Partner Andrew Oringer, generally advocated in favor of finding a balance that would permit a wide range of advice to be available. "The Holy Grail here should not be the delivery of purely conflict-free advice—it should be the delivery of conflict-safe advice," Oringer said. "If we can permit the provision of well-intentioned professional advice in an appropriately safeguarded way, we will have done well for the participants we are trying to help and protect." He went on to note that the term "inside advice" might be a more neutral way of referring to the provision of investment advice by inside providers, as compared with the more pejorative term, "conflicted advice," explaining that "concerns about conflicted advice should not lead to the conclusion that inside advice - advice provided by one already providing services to the plan or with respect to its investments - can never feasibly be permitted." Mr. Oringer had also previously blogged for BNA on the topic.4
It seems apparent that the last word has not yet been heard regarding these issues, and the fate of the regulations (and, indeed, maybe even the statute) is in substantial doubt. Additional information regarding the Subcommittee hearing can be found on the US House of Representative's Committee on Education and Labor's website. Mr. Oringer's testimony can be found here. The Subcommittee hearing can also be viewed online in its entirety here.