Bates Research | 06-10-16
Congressional Action Against the DOL Rule Fails, Three Lawsuits Filed
Guest Post by Expert Geoff Winkler
On June 8th - the same day that President Barack Obama vetoed legislation that would have vacated the Department of Labor’s (DOL) fiduciary rule - the American Council for Life Insurers (ACLI), the National Association of Insurance and Financial Advisors (NAIFA) and six NAIFA chapters from Texas filed suit in the U.S. District Court for the Northern District of Texas. The eight organizations are seeking to overturn the DOL’s fiduciary rule that will raise investment advice standards for all retirement accounts. This is the latest of three lawsuits that have been filed related to the DOL fiduciary rule in the last 10 days.
We have previously discussed the DOL’s fiduciary rule and its impact on the financial industry. The rule has been controversial since it was first proposed in 2010, leading to its ultimate withdrawal in 2011 after numerous complaints from the financial industry about costs and their ability to serve their clients. In fact, after the DOL released the new fiduciary rule on April 6th of this year, the U.S. House of Representatives introduced House Joint Resolution 88 (H.J. Res. 88) just nine days later.
Under H.J. Res. 88, the DOL’s fiduciary rule would be “disapproved and nullified,” meaning it would have no force or effect of law, but the White House issued a statement 12 days later saying the President would veto the bill to “ensure that American workers and retirees receive retirement advice in their best interest, better enabling them to protect and grow their savings.” The bill passed the House and Senate on April 28th and May 24th respectively and was presented to the President on June 7th. President Obama carried out his promised veto on Wednesday, and it does not appear that Congress has the supermajority necessary to override the Presidential veto.
The lawsuit filed by the ACLI and NAIFA on Wednesday was not the first lawsuit challenging the DOL’s fiduciary rule. In fact, there was another lawsuit filed on June 1st in the same venue, including: the Chamber of Commerce of the United States of America; Financial Service Roundtable; Insured Retirement Institute; Securities Industry and Financial Markets Association; Great Irving-Las Colinas Chamber of Commerce; Humble Area Chamber of Commerce DBA Lake Houston Area Chamber of Commerce; Lubbock Chamber of Commerce; and the Texas Association of Business.
Just one day after the lawsuit filed by the Chamber of Commerce and eight others, another lawsuit was filed in the United States District Court for the District of Columbia by the National Association for Fixed Annuities. These three lawsuits, although filed separately, share the common argument found in the U.S. Chamber of Commerce lawsuit which alleges, “The rule and PTEs [prohibited transaction exemptions] overstep the Department’s authority, create unwarranted burdens and liabilities, undermine the interest of retirement savers, and are contrary to the law.” The ACLI and NAIFA lawsuit take that last argument a step further by asking the court to declare the DOL’s fiduciary rule “…arbitrary, capricious and unconstitutional as applied to Plaintiffs’ members and their constitutionally protected commercial speech.” All three lawsuits seek to have the rule and its exemptions vacated and have asked the courts for a preliminary injunction to prevent the rule from taking effect before the lawsuits can be heard.
We will continue to keep you updated on important developments related to the new DOL Fiduciary Rule. Should you need any assistance in understanding any aspects of the new rule, we encourage you to contact Alex Russell, our DOL Fiduciary Rule point person, at (503) 670-7772 or email@example.com.