Financial industry opponents of the Labor Department's fiduciary rule are urging an appeals court to rule on their case, despite the fact that major parts of the regulation won't be implemented until 2019.
In a Dec. 8 letter to the U.S. Court of Appeals for the Fifth Circuit, the plaintiffs in a lawsuit against the rule said the delay of the regulation should not hold up their appeal, because parts of the rule have already been implemented.
"In light of ongoing compliance burdens, appellants submit this response to clarify that the delay rule does not diminish the urgency of this appeal," wrote David W. Ogden of the law firm Wilmer Hale on behalf of the American Council of Life Insurers and other plaintiffs.
In addition to ACLI, the plaintiffs include the Securities Industry and Financial Markets Association, the Financial Services Institute, the Financial Services Roundtable and the U.S. Chamber of Commerce.
In the suit they argue the DOL lacked the authority to promulgate the fiduciary rule and illegally established a private right of action for clients to sue their brokers.
They
lost decisively at the district court level in Dallas earlier this year and appealed the decision in the Fifth Circuit in New Orleans.
On Nov. 27, the DOL released
a final rule to delay the enforcement mechanisms of the fiduciary rule from Jan. 1, 2018, to July 1, 2019, to give the agency more time to reassess the impact of the regulation on the financial industry and retirement savers. The review, which may lead to substantial revisions, was ordered by President Donald J. Trump.
The plaintiffs cited the fact that two provisions of the DOL rule, which requires brokers to act in the best interests of their clients in retirement accounts,
became applicable in June. One significantly expands the number of advisers who are deemed fiduciaries and the other sets impartial conduct standards they must follow when working with retirement clients.
"Those obligations are imposing direct, substantial and continuing burdens on appellants' members," Mr. Ogden wrote. "The delay rule does not remove those requirements or stem their mounting costs."
The DOL wrote to the Fifth Circuit on Nov. 30 to tell the justices the fiduciary rule had been delayed until July 2019. The agency pointed out that it would not enforce the rule during the delay. It wants to keep the court at bay while it reviews the regulation.
But both the DOL and industry are expending resources on the regulation, and a court decision could bring some clarity about its fate, said George Michael Gerstein, counsel at law firm Stradley Ronon Stevens & Young.
"Resolution by the court would be preferred," Mr. Gerstein wrote in an email.
The decision pending in the Fifth Circuit is the most highly anticipated ruling of
several lawsuits that have been filed against the DOL regulation.
