Two insurance industry trade associations asked a federal court Wednesday to hurry up and kill the Labor Department's fiduciary duty rule.
In a letter to the 5th U.S. Circuit Court of Appeals, the American Council of Life Insurers and the National Association of Insurance and Financial Advisors said the court's delay in issuing the mandate that makes effective its March 15 decision to vacate the rule is causing compliance headaches.
The court was supposed release the mandate on May 7, but has not yet done so. Until it does, the partially implemented DOL rule is still in operation, and the agency is following a temporary enforcement policy.
"Those factors create palpable uncertainty for significant portions of the insurance and financial services industries — uncertainty that interferes with long-term planning, that risks generating consumer confusion, and that imposes ongoing compliance costs on regulated entities," wrote David W. Ogden, counsel for ACLI and NAIFA, in a letter to the 5th Circuit clerk. "Appellants therefore respectfully request that this Court issue the appellate mandate as expeditiously as possible, consistent with the Court's internal processes."
The ACLI and NAIFA are two of the plaintiffs in an industry lawsuit against the DOL rule. A split decision of a three-judge panel of the court found that the DOL exceeded its authority in promulgating the regulation.
Supporters of the regulation assert that it mitigates broker conflicts of interest that lead to the purchase of inappropriate high-fee investment products that erode retirement savings.
In May, the 5th Circuit denied motions from AARP and three states to intervene as defendants in the case when the Department of Justice, acting on behalf of DOL, did not appeal the March 15 5th Circuit decision.
Late last week, the court clerk gave no indication of when the March 15 decision would become effective, only saying that it is "still pending."
The parts of the rule that were implemented a year ago — impartial conduct standards for brokers when working with clients in retirement accounts — are still in effect until the 5th Circuit ruling becomes effective.
In the meantime, the DOL has reiterated its temporary non-enforcement policy, allowing brokers to use exemptions in the regulation without a contract as long as they make a good-faith effort to comply with the impartial conduct standards, such as acting in a client's best interests, charging reasonable fees and not making any misleading statements.
While the DOL rule wanes, the Securities and Exchange Commission has released an investment advice reform proposal that would require brokers to act in the best interests of clients. The comment deadline is Aug. 7.