Appeals Court Upholds DOL Fiduciary Rule
A federal appeals court ruled in favor of the Department of Labor on Tuesday in the fiduciary rule case filed by Market Synergy Group, an insurance agency that works with insurers to develop fixed indexed annuities and other insurance products for distribution.
A federal appeals court ruled in favor of the Department of Labor on Tuesday in the fiduciary rule case filed by Market Synergy Group, an insurance agency that works with insurers to develop fixed indexed annuities and other insurance products for distribution.
In the original lawsuit filed in a Kansas district court, Market Synergy Group challenged the DOL’s rulemaking and maintained that the DOL failed to follow the appropriate procedures and violated the Administrative Procedures Act and Regulatory Flexibility Act by issuing a final rule that placed fixed indexed annuities under the best interest contract exemption, which permits brokers to earn commissions if they sign a contract to act in the best interests of their clients.
The U.S. Court of Appeals for the 10th Circuit upheld the lower court ruling that granted summary judgment to the DOL, ruling that the agency did not violate the APA in publishing its fiduciary rule, finding that there was adequate notice, no arbitrary treatment of FIAs as compared to other fixed annuities, and an adequate economic impact analysis.
Market Synergy Group previously asserted that the rule will have “grave consequences” for its business, which is heavily dependent on its ability to receive compensation generated from fixed indexed annuities sales. The group estimated that its revenue will decline by almost 80 percent and that more than 20,000 independent insurance agents will exit the marketplace if the rule change takes effect.
“The DOL considered both sides of this issue and ultimately decided to treat FIAs differently than fixed rate annuities because of their risk, complexity, and conflicts of interests. It did so with evidentiary support in the record,” the court stated in its decision.
Another fiduciary rule lawsuit filed by the U.S. Chamber of Commerce, Securities Industry and Financial Markets Association, Financial Services Institute, and others, is currently pending in the Fifth Circuit Court of Appeals.
