Dep artment of Labor Plans to Repropose Revisions to Fiduciary Rule

1. Department of Labor Plans to Repropose Revisions toFiduciary Rule

2. DoL should use empirical data to identify problem it seeks to solve. • Any rule similar to the 2010 proposals would adversely impact ability to serve customers. • Substantive coordination between DoL and the SEC is necessary. • DoLand SEC should coordinate timing of any new rules.

3. Chronology July 21, 2010 – The Dodd-Frank Act Is Signed Into Law Section 913 Required a Securities and Exchange Commission Study on a Uniform Fiduciary Standard that Must Be “Business-Model” Neutral Oct. 22, 2010 – DOL Proposes Fiduciary Definition Regulation DOL did not have a mandate under the Dodd-Frank Act Original Proposal Was Not Business-Model Neutral Widespread opposition Sept. 19, 2011 – DOL Withdraws Fiduciary Proposal; Will Re-Propose “We honestly weren’t as clear as we could have been and we’re trying to fix that, said [Assistant Secretary of Labor Phyllis] Borzi.” See Margaret Collins, “Labor to Delay Rule on Fiduciary Duty: Borzi,” Bloomberg (Sept. 19, 2011) Sept. 10, 2013 – DOL Focused on Issuing A Revised Rule

4. The IRA Industry • IRAs are essentially retail brokerage accounts with deferred tax advantages. IRAs have not been regulated like employer-sponsored retirement vehicles. • IRAs are the fastest growing source of retirement savings and represent 27% of personal retirement assets in the U.S.

5. DOL’s Original “Fiduciary” Rule Proposal The DOL originally proposed a rule that would “more broadly define the circumstances under which a person is considered to be a ‘fiduciary’ to an employee benefit plan or a plan’s participants,” which would have amended 35 years of ERISA fiduciary practice. What? Firms and persons are deemed a fiduciary under the “investment advice” definition if they: Existing ERISA Regulation DOL’s Original Proposal • Give advice as to the value of or make recommendations for investing, purchasing/selling securities or other property: • on a regular basis • pursuant to a mutual agreement, arrangement or understanding, with the plan or a plan fiduciary, that • the advice will serve as the client’s primary basis for investment decisions with respect to plan assets, and that • the advice will be individualized based on the particular needs of the plan Give advice or recommendations as to the value of securities or other property; or advice about the merits and risks of investing in, purchasing, holding or selling securities or other property; or the management of securities or other property on a regular basis pursuant to a mutual agreement, arrangement or understanding, with the plan or a plan fiduciary, that the advice will serve as the client’s primary basis for investment decisionswith respect to plan assets, and that the advice will be individualized based on the particular needs of the plan. AND bring in broker-dealers: X X X + Have an agreement, arrangement or understanding with the plan, fiduciary or participant that advice given will be individualized and may be considered in connection with plan investments. Source: Dep’t of Labor, “Definition of the Term ‘Fiduciary,’” [RIN 1210-AB32] 75 Fed. Reg. 65,263 (Oct. 22, 2010) (“Proposing Release”).

6. DOL’s Original Proposal Increased Costs and Puts Clients’ Choice at Risk • DOL’s original proposal would (1) increase Main Street investors’ costs and restrict their access to products and services;1 or (2) limit investors’ access to education and guidance. • 88% of U.S. households rely exclusively on commissioned-based brokerage for access to investment products and services, and investment education and guidance.2 Impact of Original Proposal Current Structure • Commission • No investment restrictions • Provide investment education, but not advice (1) Eliminates “Education & Guidance Brokerage” for IRAs, 401(k), and similar accounts; (2) Increased cost for investors with low-transaction accounts (contradicts FINRA’s suitability standards for securities broker-dealers) Self Directed Brokerage Self Directed Brokerage 88% • Commission • No investment restrictions • Investment education and guidance Education & Guidance Brokerage Client Choice at Risk 12% • Fee-based • Substantial investment restrictions • Investment advice Fee-based Advisory Fee-based Advisory 1Source: Investment Company Institute, “The U.S. Retirement Market” (2009) 2Source: Standard of Care Harmonization: Impact Assessment for SEC (Oct. 2010), available at http://www.sifma.org/issues/item.aspx?id=21999 (“Oliver Wyman/SIFMA Study”)

7. Investors • Restricts access totraditional brokerage used by nearly all small investors • Mutual Fund companies will abandon small brokerage accounts • Fee-based Advisory Model is untenable for smaller accounts Increases cost to low and middle income IRA account holders by 195% Eliminates client access for about 18 million IRAs Account minimums would have to be raised to at least $25,000 * About 50% of all IRA investors have less than $25,000 By 2030, roughly $240 billion in retirement savings will be lost Bars client’s access to investor education forself-directed accounts Broker-Dealers Summary of Concerns with DOL’s Original ERISA Fiduciary Proposal The significant market disruption that would be caused by the anticipated rule is not justified. There is no evidence of fraud or abuse in IRAs, no enforcement actions, no GAO reports indicating problems with the current rule, no RFIs issued, and no demonstration by the DOL of any need for the anticipated rule. Source: Oliver Wyman, “Oliver Wyman report: Assessment of the impact of the Department of Labor’s proposed “fiduciary” definition rule on IRA consumers,” (12 April 2011), available athttp://www.dol.gov/ebsa/pdf/WymanStudy041211.pdf.

8. Members and The Public Expressed Concerns Since 2011, roughly 200 Comment Letters were filed and over 80 Members of Congress—on a bipartisan and bi-cameral basis—have signed letters of concern to Secretary Hilda Solis, Acting Secretary Harris, and to the Administration regarding DOL’s original rule proposal: House Republicans 1. Rep. Judy Biggert 2. Rep. Dave Camp 3. Rep. Jo Ann Emerson 4. Rep. Mike Fitzpatrick 5. Rep. Scott Garrett 6. Rep. Nan Hayworth 7. Rep. Jeb Hensarling 8. Rep. Michael Grimm 9. Rep. Peter King 10. Rep. Jack Kingston 11. Rep. John Kline 12. Rep. Frank Lucas 13. Rep. B. Luetkemeyer 14. Rep. Don Manzullo 15. Rep. Kenny Marchant 16. Rep. Thad McCotter 17. Rep. Randy Neugebauer 18. Rep. Erik Paulsen 19. Rep. Dennis Rehberg 20. Rep. Ed Royce 21. Rep. David Schweikert 22. Rep. Steve Stivers 23. Rep. Patrick Tiberi 24. Rep. L. Westmoreland 34. Rep. Yvette Clark 35. Rep. John Larson 36. Rep. Barbara Lee 37. Rep. John Lewis 38. Rep. Jim Matheson 39. Rep. Carolyn McCarthy 40. Rep. Gregory Meeks 41. Rep. Jim Moran 42. Rep. Chris Murphy 43. Rep. Richard Neal 44. Rep. Eleanor Holmes Norton 45. Rep. Bill Owens 46. Rep. Bill Pascrell 47. Rep. Ed Pastor 48. Rep. Ed Perlmutter 49. Rep. Gary Peters 50. Rep. Pedro Pierluisi 51. Rep. Jared Polis 52. Rep. Charlie Rangel 53. Rep. Laura Richardson 54. Rep. Cedric Richmond 55. Rep. Bobby Rush 56. Rep. Allyson Schwartz 57. Rep. AlbioSires 58. Rep. Bobby Scott 59. Rep. David Scott 60. Rep. Terri Sewell 61. Rep. Bennie Thompson 62. Rep. Mike Thompson 63. Rep. Frederica Wilson 64. Rep. Maxine Waters 65. Rep. David Wu Senate Republicans 1. Sen. Roy Blunt 2. Sen. Richard Burr 3. Sen. Saxby Chambliss 4. Sen. Mike Enzi 5. Sen. Orin Hatch 6. Sen. Johnny Isakson 7. Sen. Rob Portman Senate Democrats 1. Sen. Max Baucus 2. Sen. Michael Bennet 3. Sen. Jeff Bingaman 4. Sen. Mark Begich 5. Sen. Benjamin Cardin 6. Sen. Tom Carper 7. Sen. Bob Casey 8. Sen. Kirsten Gillibrand 9. Sen. Kay Hagan 10. Sen. Tom Harkin 11. Sen. Tim Johnson 12. Sen. John Kerry 13. Sen. Amy Klobuchar 14. Sen. Claire McCaskill 15. Sen. Mark Pryor 16. Sen. Jack Reed 17. Sen. Jeanne Shaheen 18. Sen. Debbie Stabenow 19. Sen. Jon Tester 20. Sen. Mark Warner 21. Sen. Sheldon Whitehouse • Consumer Groups & Advocates • Consumer Federation of America • Professor Mercer Bullard • Media • WSJ Editorial Sept. 20, 2011 • Op-Ed - The Hill, Sept. 2, 20011 • WSJ Editorial, Aug. 21, 2011 • Industry Associations Opposing Rule • ACLI • Financial Services Institute • NAIFA • SIFMA • The Financial Services Roundtable • U.S. Chamber of Commerce House Democrats 1. Rep. Jason Altmire 2. Rep. John Barrow 3. Rep. Karen Bass 4. Rep. Joyce Beatty 5. Rep. Shelley Berkley 6. Rep. Sanford Bishop 7. Rep. Dan Boren 8. Rep. Leonard Boswell 9. Rep. G.K. Butterfield 10. Rep. Dennis Cardoza 11. Rep. Russ Carnahan 12. Rep. John Carney 13. Rep. Andre Carson 14. Rep. Donna Christensen 15. Rep. Lacy Clay 16. Rep. E. Cleaver 17. Rep. Jim Clyburn 18. Rep. Gerry Connolly 19. Rep. Joe Courtney 20. Rep. Joseph Crowley 21. Rep. Elijah Cummings 22. Rep. Danny Davis 23. Rep. Marcia Fudge 24. Rep. TulsiGabbard 25. Rep. Martin Heinrich 26. Rep. Jim Himes 27. Rep. Rush Holt 28. Rep. Steve Israel 29. Rep. Hakeem Jefferies 30. Rep. Hank Johnson 31. Rep. Robin Kelly 32. Rep. Ron Kind 33. Rep. Rick Larsen

9. 2011 Securities and Exchange Commission Study • SEC staff noted Main Street investors might face increased costs if their brokerage accounts were converted to fee-based advisory accounts. • SEC Study on Investment Advisers and Broker-Dealers (2011), page 152: “If, in response to the elimination of the broker-dealer exclusion [under the Investment Advisers Act], broker-dealers elected to convert their brokerage accounts from commission-based accounts to fee-based accounts, certain retail customers might face increased costs, and consequently the profitability of their investment decisions could be eroded, especially accounts that are not actively traded[.]” • IRAs are just such accounts. As of 23 September 2013