Fifth Circuit Court of Appeals vacates DOL fiduciary rule

In split decision, judges say agency exceeded authority.
MAR 15, 2018

The Fifth Circuit Court of Appeals vacated the Labor Department's fiduciary rule in a split decision announced late Thursday afternoon, overturning a Dallas district court that was just as adamant in upholding the measure. By a 2-1 vote, the appellate judges held that the agency exceeded its statutory authority under retirement law — the Employee Retirement Income Security Act — in promulgating the measure. The rule requires that brokers act in the best interests of their clients in retirement accounts. The regulation replaced a five-part test that determined whether a broker was a fiduciary. The judges criticized a key provision of the rule, the best-interest-contract exemption. The BICE allows brokers to receive variable compensation for investment products they recommend, creating a potential conflict, as long as they sign a legally binding agreement to act in a client's best interests. "The BICE supplants former exemptions with a web of duties and legal vulnerabilities," the majority opinion states. "Expanding the scope of DOL regulation in vast and novel ways is valid only if it is authorized by ERISA Titles I and II." The lawsuit was brought by several industry groups that oppose the rule, including the U.S. Chamber of Commerce, the Securities Industry and Financial Markets Association and the Financial Services Institute. A Dallas district court upheld the DOL rule in a decision last year that eviscerated the industry arguments against the rule. The industry decisively won in their appeal Thursday. The DOL rule, which was promulgated during the Obama administration, has been partially implemented, while the remaining provisions are under a review mandated by President Donald J. Trump that could lead to major changes.

Latest News

The 2025 InvestmentNews Awards Excellence Awardees revealed
The 2025 InvestmentNews Awards Excellence Awardees revealed

From outstanding individuals to innovative organizations, find out who made the final shortlist for top honors at the IN awards, now in its second year.

Top RIA Cresset warns of 'inevitable' recession amid tariff uncertainty
Top RIA Cresset warns of 'inevitable' recession amid tariff uncertainty

Cresset's Susie Cranston is expecting an economic recession, but says her $65 billion RIA sees "great opportunity" to keep investing in a down market.

Edward Jones joins the crowd to sell more alternative investments
Edward Jones joins the crowd to sell more alternative investments

“There’s a big pull to alternative investments right now because of volatility of the stock market,” Kevin Gannon, CEO of Robert A. Stanger & Co., said.

Record RIA M&A activity marks strong start to 2025
Record RIA M&A activity marks strong start to 2025

Sellers shift focus: It's not about succession anymore.

IB+ Data Hub offers strategic edge for U.S. wealth advisors and RIAs advising business clients
IB+ Data Hub offers strategic edge for U.S. wealth advisors and RIAs advising business clients

Platform being adopted by independent-minded advisors who see insurance as a core pillar of their business.

SPONSORED Compliance in real time: Technology's expanding role in RIA oversight

RIAs face rising regulatory pressure in 2025. Forward-looking firms are responding with embedded technology, not more paperwork.

SPONSORED Advisory firms confront crossroads amid historic wealth transfer

As inheritances are set to reshape client portfolios and next-gen heirs demand digital-first experiences, firms are retooling their wealth tech stacks and succession models in real time.