Citing the need for additional time to gather input and review, the U.S. Department of Labor (DOL) recently withdrew a proposal to re-write the definition of a fiduciary and will instead introduce a new proposal in early 2012.

The rule, first proposed in October 2010, would have expanded the definition and may have adversely affected brokers who have commission-based IRA business.

The proposal received more than 200 comments as well as bipartisan opposition at a July hearing before the House Education and Workforce Committee.

The current definition, established in 1975 by the DOL following the enactment of Employee Retirement Income Security Act (ERISA) in 1974, includes several requirements for a fiduciary. Among them: The advice must be given on a regular basis as well as serve as the primary basis for investment decisions.

The proposed new definition would have extended those requirements to include advice given on a one-time basis and to any situations where the advice was at least “considered.”

Under this definition, brokers who had any IRA business outside of advisory accounts would have been considered fiduciaries because those account holders would at least “consider” their advice. As fiduciaries, the brokers would not have been able to collect commissions or revenue-sharing payments.

The proposed rule would also have forced brokers to restructure their compensation as wrap fees or convert brokerage IRAs to advisory accounts, which may be more expensive for investors and deliver more services than they want.

In withdrawing its current proposal, the DOL noted in a statement it expects to revise provisions of the rule including clarifying that fiduciary advice is limited to “individualized advice directed to specific parties.” Also, the agency expects to respond to concerns raised about the application of the rule to routine appraisals and to questions about limits that would be set in relation to certain “arm’s length” transactions, such as swaps.