Industry Groups File Suit to Block DOL Fiduciary Rule
Industry trade groups have filed a lawsuit challenging the Department of Labor’s controversial fiduciary rule that was released in April.
U.S. Chamber of Commerce, Financial Services Institute, Financial Services Roundtable, Greater Irving-Las Colinas’ Chamber of Commerce, Insured Retirement Institute, Lake Houston Area Chamber of Commerce, Lubbock Chamber of Commerce, Securities Industry and Financial Markets Association, and Texas Association of Business filed a legal challenge to the Department of Labor’s fiduciary rule for brokers and registered investment advisers serving Americans with individual retirement accounts and 401(k) plans.
The Chamber of Commerce and others have been outspoken opponents of the rule that redefines what is considered a “fiduciary” as it pertains to giving investment advice.
The groups are taking issue with the provision that leaves advisors open to expensive class action lawsuits on behalf of disgruntled investors, as well as the belief that the rule will result in added expenses that will likely eliminate affordable investment advice for many low- and middle-income savers. Since the beginning, opponents have questioned the authority of the DOL to enforce such a rule.
In a joint statement, the chief executive officers of the five national association co-plaintiffs, said that, “The Department of Labor’s new, 1,023-page rule creates sweeping changes to existing regulations that will make saving for retirement more difficult for the very same hardworking American families and individuals it claims to protect. It specifically hinders many of our member firms’ ability to continue providing the level of holistic financial advice and suitable investment options their clients are accustomed to.”
They added, “Our organizations are now asking a court to review whether the Department of Labor overstepped its boundaries, creating a rule that will leave Americans with fewer retirement choices, higher costs and reduced access to professional financial advice. Further the ‘private right of action’ mechanism creates significant new legal risk for financial advisors, who will face the threat of class action lawyers challenging their every move.
“This lawsuit is necessary to prevent the Labor Department from exceeding the authority that was assigned to it by Congress. More importantly, it will protect retirement savers and our member firms, who are committed to their financial futures.”
The lawsuit comes on the heels of the passage of H.J. Res. 88, a joint resolution disapproving of the new rule which cleared both houses of Congress on largely party-line votes. President Obama has made it clear that he will veto the resolution, which failed to garner veto-proof majorities in either the Senate or the House of Representatives.
Stay tuned for more on the upcoming lawsuit and other fiduciary rule news.
