Appeals court upholds DOL fiduciary rule in case involving fixed indexed annuities

Market Synergy Group argued the regulation treated the annuity products arbitrarily and violated rulemaking procedures

Mar 13, 2018 @ 5:16 pm

By Mark Schoeff Jr.

A federal appeals court upheld the Labor Department's fiduciary rule in a decision issued on Tuesday.

The 10th Circuit Court of Appeals ruled in favor of a Kansas district court that granted summary judgment to the DOL in a lawsuit filed by Market Synergy Group Inc., a Topeka insurance agency that develops fixed indexed annuities and other proprietary insurance products.

The firm argued that the DOL rule treated fixed indexed annuities arbitrarily by forcing the products under the best-interest contract exemption, a provision of the regulation that allows brokers to earn variable compensation as long as they sign a legally binding contract to act in the best interests of their clients.

Fixed indexed annuities currently operate under the same exemption of federal retirement law as fixed annuities. But the DOL put them under the so-called BICE due to their complexity and the potential conflicts of interest associated with their sales.

Market Synergy also claimed that DOL violated rulemaking procedures and didn't do a proper economic impact analysis in promulgating the fiduciary rule.

The 10th Circuit judges held that DOL followed appropriate administrative procedure, was fair in its treatment of fixed indexed annuities and that it conducted an appropriate economic analysis.

"Once again, a court has decided that the DOL was on solid footing when it promulgated this rule, that it followed the proper process and justified its decision-making," said Micah Hauptman, financial services counsel at the Consumer Federation of America.

A spokesman for Market Synergy did not immediately respond to a request for comment.

The DOL rule is the subject of many industry lawsuits. Tuesday's ruling was the first by an appeals court. A lawsuit brought by several trade associations, including the U.S. Chamber of Commerce, the Securities Industry and Financial Markets Association and the Financial Services Institute, is now in the Fifth Circuit Court of Appeals.

"The Fifth Circuit is the whole ballgame," said Kevin Walsh, an attorney at Groom Law Group. "That's where the best arguments against the rule are being made."

The court has not yet handed down a decision in the case, which involves not only claims about administrative procedure but also raises constitutional questions about the DOL rule.

The DOL has delayed full implementation of the fiduciary rule while it reassesses its impact on financial firms and investors under a directive from President Donald J. Trump that could lead to major changes.


What do you think?

View comments

Recommended for you

Featured video


The #MeToo movement and the financial advice industry

Attendees at the Women to Watch luncheon commend the #MeToo movement for raising awareness about the issue of sexual harassment and bringing women together.

Latest news & opinion

DOL fiduciary rule: Industry reacts to Fifth Circuit ruling

Groups on both sides of the fiduciary debate had plenty to say.

Fifth Circuit Court of Appeals vacates DOL fiduciary rule

In split decision, judges say agency exceeded authority.

UBS, after dumping the broker protocol, continues to see brokers come and go

The wirehouse has seen 14 individuals or teams leave and five join for a net loss of $2.4 billion in AUM

Merrill vets ready to recharge breakaway recruiting efforts

After regrouping in wake of broker-protocol exits, Snowden Lane Partners is ready to recruit wirehouse brokers and RIAs.

Ron Carson: I'll leave Cetera if it's sold to LPL

Head of the Carson Group, who was affiliated with LPL for 28 years, tells his 48 partner firms he has no intention of returning to his old broker-dealer.


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 It'll help us continue to serve you.

Yes, show me how to whitelist

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


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print