Opponents of the Department of Labor fiduciary rule are seeking to block the measure in a Dallas federal court, while in Washington they're submitting comment letters in support of delaying next month's implementation deadline.
In the U.S. District Court of Northern Texas, the financial industry trade association plaintiffs in a lawsuit against the fiduciary rule filed a preliminary injunction last Friday to stop the regulation, which will become applicable on April 10. They asked for a ruling on the injunction by March 20.
The DOL has proposed delaying its implementation for 60 days while the agency conducts an assessment of the regulation, called for by President Donald Trump in a Feb. 3 memo. The regulation requires financial advisers to act in the best interests of clients in retirement accounts.
The industry plaintiffs argued that if the DOL is not able to delay the rule before April 10, financial firms would continue to have to "sink extensive resources into compliance capabilities."
Besides, the plaintiffs said, the injunction is necessary to provide the DOL time to review the rule and for an appeals court to make a decision on the Dallas case, which the plaintiffs lost at the district level in February.
"The public interest heavily favors an injunction so that the serious questions about the rule's validity can be resolved without further wasteful, unwarranted and unrecoverable costs being incurred first," the plaintiffs wrote in a memo supporting the motion.
The industry groups are not likely to prevail because they previously lost at the district level not only in Dallas but also in similar suits around the country.
"There's a real question as to whether the injunction will be granted in light of the courts' treatment of the rule so far," said George Michael Gerstein, counsel at Stradley Ronon Stevens & Young. "Seeking the injunction does represent the concern and the confusion many have over the compliance [deadline] in April and particularly any litigation risk that might arise."
The Labor Department tried to alleviate some confusion about timing last Friday by issuing an enforcement memorandum intended to ease compliance concerns in the near term, as it reviews the rule and before any delay is final. But questions remain.
One of the challenges for the industry associations in their court action is they're asking for the injunction from the same judge, Chief Judge Barbara M.G. Lynn, who ruled against every claim in their lawsuit.
"It's just a last-minute desperate attempt by the industry to evade the rule," said Micah Hauptman, financial services counsel at the Consumer Federation of America. "They totally disregard what the judge wrote in her district-court opinion and all the evidence the DOL provided in support of the rule."
Several industry groups — including three that are plaintiffs in Dallas, the
Securities Industry and Financial Markets Association, the
U.S. Chamber of Commerce and the Financial Services Roundtable — filed comment letters to the DOL on Monday and Tuesday in favor of the 60-day delay.
The DOL had received
485 letters as of midday Tuesday. The comment deadline is Friday.
The industry groups are all asserting that the delay should go into effect immediately when the final delay rule is published in the Federal Register, likely later this month. They also maintain that a longer delay — up to 180 days — is needed for the review, and that the DOL's original cost-benefit analysis of the rule understated the potential harm to investors and firms.
In his memo to DOL, Mr. Trump directed the agency to modify or repeal the rule if it is found to limit investor choice or increase litigation risk for firms.
Financial industry opponents are rehashing arguments they've been making unsuccessfully for the nearly seven years the regulation has been debated, according to Mr. Hauptman.
"What they have now is an administration that just believes them, whatever they say," he said. "The administration is setting itself up for a legal challenge."
