DOL Still Defending Fiduciary Rule

By Nevin Adams • February 02, 2017 • 0 Comments
Forget the rumors — the change in administrations in Washington apparently hasn’t stilled the Department of Labor’s (DOL) legal defense of the fiduciary rule.

InvestmentNews reports that the DOL has responded to a brief from the plaintiffs in a case pending in the Northern District of Texas. According to the report, the plaintiffs in that case (actually three cases combined due to the commonality of the issues raised; see “Combined Litigation” below) asserted that a recent DOL proposed exemption designed to ease compliance for some fixed-indexed annuities providers demonstrated that the advice rule would “upend” the distribution system and proved it was an example of “regulatory overreach.”

The Jan. 25 filing also claimed that recent DOL guidance on the rule — which requires financial advisers to act in the best interests of their clients in retirement accounts — “transforms virtually all sales activity into fiduciary advice,” according to the report.

However, in a Jan. 30 reply, Department of Justice lawyers pushed back, noting that, “Plaintiffs’ response … mischaracterizes the Department of Labor’s rulemaking and guidance.”

So, while some have opined that the Trump administration might just walk away from the legal fight, that hasn’t happened yet.

Combined Litigation

The litigation in Texas combines suits by the American Council of Life Insurers, the National Association of Insurance and Financial Advisors (NAIFA) and six NAIFA chapters in Texas, the Indexed Annuity Leadership Council (IALC), and several providers of these insurance products, in the U.S. District Court for the Northern District of Texas; and the first lawsuit filed, that by the Chamber of Commerce of the United States of America, the Financial Services Institute, Inc., the Financial Services Roundtable, the Greater Irving-Las Colinas Chamber of Commerce, the Humble Area Chamber of Commerce DBA Lake Houston Area Chamber of Commerce, the Insured Retirement Institute, the Lubbock Chamber of Commerce, the Securities Industry and Financial Markets Association, and the Texas Association of Business.

It is possible that Chief Judge Barbara M.G. Lynn could issue a ruling any day. So far, two of the cases challenging the rule have had their day in court; both came down strongly in favor of the DOL’s fiduciary rule. Those cases are currently being appealed.