Before the Department of Labor rewrites its proposal to redefine fiduciary responsibility — a new proposal is expected in the first half of 2012 — there are three changes SIFMA would like to see in the rulemaking process, said SIFMA’s chairman emeritus, John Taft. The Department of Labor’s original rule was withdrawn in September.

First, any new rule “should be preceded with a real cost/benefit analysis,” Taft, who is also CEO of RBC Wealth Management’s U.S. operations, told Financial Planning in an interview. Secondly, the rule should not cover IRAs, he said, as IRAs will be covered by any standard the SEC proposes. The Dodd-Frank act authorizes the SEC to come up with a new uniform fiduciary standard of care, although there is no set deadline for this to happen.

The way the original Labor Department rule was written, had it been implemented, access to IRA advice would have been far more difficult for investors to obtain, Taft said. Many activities broker-dealers currently perform for their IRA accounts, such as buying individual stocks and bonds from their own inventory for those accounts, would have become prohibited, he said. The consequences of violating those prohibitions would have been so severe that broker-dealers would have had no incentive to accept many types of IRA accounts, depending on size and investments, according to Taft.

Instead, the SEC should be charged with protecting individual retail investors, Taft said, and that is why the Labor Department should steer clear of writing anything with such drastic consequences for IRAs.

Finally, the Department of Labor should coordinate with the SEC before it re-proposes a new fiduciary standard of care, Taft said. Given that the SEC has its own authority under Dodd-Frank to address the fiduciary standard of care, such coordination is really vital to avoid conflicts.

Danielle Reed writes for Financial Planning.