Federal court rejects NAFA attempt to kill DOL fiduciary rule

In the first legal challenge to be decided, judge upholds Department of Labor regulation

Nov 4, 2016 @ 5:18 pm

By Bruce Kelly

In a victory for the Department of Labor, a federal judge Friday rejected an attempt by an insurance trade group to strike down its new fiduciary rule for retirement advice.

In the first court decision involving a legal challenge to the DOL rule, U.S. district judge Randolph Moss in Washington, D.C., turned back the challenge brought by the National Association for Fixed Annuities.

In addition to seeking a preliminary injunction to delay the implementation date, NAFA also was asking the court to vacate and set aside the fiduciary rule and its associated exemptions.

“The court will deny NAFA's motions for a preliminary injunction and for summary judgment and will grant the [Labor] Department's cross-motion for summary judgment,” wrote the judge in a memorandum opinion.

Secretary of Labor Thomas Perez, named in the suit, called the ruling "a win for working Americans who simply want a secure retirement."

"The conflicts of interest rule was developed after substantial input from a variety of stakeholders, including the industry, and it will make sure that retirement savers receive advice that puts their interests first," he said in a statement Saturday. "I'm pleased that the court recognized the comprehensive and thoughtful process we used in crafting this rule."

NAFA had challenged the new rules “on numerous grounds,” according to the memorandum, including the new definition of fiduciary and a claim that the DOL had acted beyond its authority.

(More: A comprehensive, searchable database of advisers' fiduciary FAQs)

NAFA further contended that “the new rules will have catastrophic consequences for the fixed indexed annuities industry.”

Meeting the April 2017 deadline for initial implementation of the rule is "almost an impossibility for the industry," Chip Anderson, NAFA's executive director, told InvestmentNews when the lawsuit was filed in June.

NAFA's operation manager, Bailey Sorensen, did not return a call late Friday to comment.

Steve Hall, the legal director for Better Markets, a consumer group, called the court decision a “huge victory for all Americans saving for a safe and secure retirement.”

The DOL and Mr. Perez still face five lawsuits from firms and industry trade groups seeking to stop the new fiduciary rule.

Mr. Perez has publicly been very positive about the law standing up to court challenges.

“I'm very confident,” he told an audience in June at a National Press Club luncheon in Washington.

Mr. Perez said two factors weigh in favor of the regulation. First, as he reiterated in the statement Saturday, the DOL conducted an “inclusive and deliberate [regulatory] process” in which it sought extensive comments and modified the rule in response to criticisms.

Second, the regulation can stand on its merits, he said.


What do you think?

View comments

Recommended for you

Featured video


What's the top issue on advisers minds?

Laura Pierson from Carson Group discusses how the old topic of 'Human Capital' is hot again because of millennials.

Latest news & opinion

Advisor Group acquires Signator Investors and plans on folding it into Royal Alliance

Advisor Group takes 'orphan' broker-dealer off the hands of John Hancock Financial Services.

It's official: DOL fiduciary rule is dead

The 5th Circuit Court of Appeals issued a mandate Thursday making its March 15 decision to strike down the regulation effective.

Opaque, outdated 401(k) plan disclosures harming investors, advisers

Morningstar report: Lack of data on fees, investments makes advice on rollovers costlier and more challenging for investors.

Mutual funds feel the pinch of platform fees

No-transaction-fee options are a big hit with investors, but funds wind up paying the costs — and passing them on.

Divorce reduces retirement readiness

The new tax law could increase financial challenges for divorced people, but planning opportunities abound.


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print