The regulatory scheme governing the registration and sales of securities and the regulatory scheme governing retirement plan investments have historically developed separately from each other. The SEC and the U.S. Department of Labor’s Employee Benefits Security Administration (the “EBSA”) had worked independently of each other for decades, with their regulatory paths only occasionally crossing. Indeed, not only had there been little coordination between the SEC and EBSA, there had always been a bit of regulatory animosity between the two agencies.
The compliance marketplace has likewise developed separately, as the typical securities compliance staffs in financial services organizations have minimal relationship with the ERISA compliance staffs. The word “compliance” actually has greatly different meanings for the two different kinds of staffs.
It seems like ancient history now, but in 2008 the DOL and SEC began to address this with a formal “Memorandum of Understanding Concerning Cooperation Between the U.S. Securities and Exchange Commission and the U.S. Department of Labor” (the “MOU). This MOU resulted in the regional offices of the EBSA establishing regular and continuing relationships with their associated regional SEC Office on matters which “would be of interest to the other regulator in fulfilling their respective regulatory responsibilities”- occurring where either organization found themselves dealing with bad acting retirement plan advisers and broker-dealers.
The MOU covered several activities:
- Regular Meetings
- Points of Contact
- DOL Access to Non-Public SEC Examination Information
- SEC and DOL Access to Non-Public SEC and DOL Enforcement Information.
I encourage you to read the entire MOU. It really is pretty extensive. The processes implemented over 10 years ago are still very much working in at least a number of EBSA offices, with regularly scheduled meetings and the establishment of long term relationship between the personnel in both agencies.
The MOU could not, however, address the substantial differences in the rules governing how either agency has dealt with retirement plan advice and product sales. Though they each sought to protect investors and plan participants, their activities continue to be disjointed by their very nature. Corporate compliance staffs, likewise, have generally continued to reflect this disjointedness.
It is worth now considering, however, the impact of this MOU on fiduciary enforcement with the publication of the SEC’s new Reg IB on fiduciary duties and the suggestions from EBSA that a a new fiduciary rule will be closely related to that of the SEC.
What will happen where you have two broadly empowered federal agencies working from what may be the same playbook (or at least very similar ones), where you already have a well established, coordinated cross-enforcement structure in place? It would seem that the potential is there for a substantial impact.