Industry plaintiffs appeal Dallas court's decision to uphold DOL fiduciary rule

Opponents of rule seek to overturn loss in district court

Feb 24, 2017 @ 6:00 pm

By Mark Schoeff Jr.

Financial industry trade groups seeking to stop the DOL fiduciary rule are appealing a recent decision by a Dallas federal judge to uphold the measure.

The Securities Industry and Financial Markets Association, the Financial Services Institute, the Insured Retirement Institute, the Financial Services Roundtable and the U.S. Chamber of Commerce filed the appeal on Friday in the Fifth Circuit Court of Appeals in New Orleans.

Earlier this month, the groups lost at the district court level when Chief Judge Barbara M.G. Lynn of the Northern District of Texas granted summary judgment to the DOL. She shot down each of the industry's arguments against the rule, which included claims that DOL lacked authority to promulgate it, violated rulemaking parameters and created a new "private right of action" for clients to pursuing litigation against financial advisers.

But the plaintiffs say they can succeed at the appeals level.

"We remain confident in the merits and strength of our case and stand by our assertion that the Department of Labor exceeded its authority," the groups said in a joint statement. "We have long supported a best interest standard, adopted by the appropriate regulatory authority and across all individual investor accounts, not just retirement. This is a misguided rule that will harm retirement savers and financial services firms that provide needed assistance and options to their clients, including modest savers and small business employees. Further the 'private right of action' mechanism creates unwarranted litigation risk for financial advisers, who will face the threat of meritless class action lawsuits challenging their every move."

The appeal comes as the Trump administration has ordered DOL to reassess the rule and modify or rescind it if the agency finds that it causes harm to investors or firms. The directive echoes industry concerns that the rule is too complex and costly and will price investors with modest assets out of the advice market. Proponents of the rule argue that it is necessary to protect workers and retirees from conflicted advice that results in the purchase of inappropriate high-fee investments that erode savings.

The DOL is seeking a delay in the April 10 implementation date of the rule, which would require financial advisers to act in the best interests of their clients in retirement accounts.


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