DOL Halts Fiduciary Rule Enforcement Following Appeals Court Decision
In light of the Fifth Circuit Court of Appeals ruling to vacate the Department of Labor’s fiduciary rule, federal regulators will not enforce the rule that requires brokers to act in the best interests of their clients when providing retirement investment advice.
In light of the Fifth Circuit Court of Appeals ruling to vacate the Department of Labor’s fiduciary rule, federal regulators will not enforce the rule that requires brokers to act in the best interests of their clients when providing retirement investment advice.
In a split decision on Thursday, the appeals court ruled that the DOL “lacked statutory authority to promulgate the rule with its overreaching definition of ‘investment advice fiduciary.’” The nine plaintiffs in the case included the U.S. Chamber of Commerce, the Securities Industry and Financial Markets Association, and the Financial Services Institute.
“Pending further review, the Department of Labor will not be enforcing the fiduciary rule,” according to a statement made by a Labor spokesperson.
On Monday, Securities and Exchange Commission Chairman Jay Clayton reportedly told attendees of SIFMA’s Compliance and Legal Seminar in Orlando, Florida that the agency’s fiduciary rule plans have not been disrupted following the appeals court ruling against the DOL.
“Seventy-two hours later, it hasn’t affected the way I’m approaching this,” said Clayton. “There’s a lot going on there from what it means for the Department of Labor. I haven’t had any discussions with the Department of Labor… but as far as I’m concerned, we’re moving forward.”
The fiduciary rule, which is currently under review as directed by President Trump, redefines who is considered an investment advice fiduciary under the Employee Retirement Income Security Act of 1974. Enforcement of the rule was previously delayed for 18-months until July 1, 2019.
The Tenth Circuit Court of Appeals recently ruled in favor of the DOL in a separate case filed by Market Synergy Group, an insurance agency that works with insurers to develop fixed indexed annuities and other insurance products for distribution.
The DOL has until May 1 to file an appeal of the Fifth Circuit’s ruling. Given the Trump administration’s open hostility to the Obama-era rule, however, an appeal is not expected.
