March 19, 2018
The U.S. Fifth Circuit Court of Appeals Friday struck down last year’s controversial regulations promulgated by the Department of Labor which imposed fiduciary standards on stockbrokers and insurance professionals respecting ERISA retirement plans and IRAs. Investment Advisors were already subject to fiduciary standards. The case is Chamber of Commerce et al v. US Department of Labor.
Just days earlier, the U.S. Tenth Circuit Court of Appeals upheld the DoL’s inclusion of indexed annuities under the Fiduciary Rule, which was just one aspect of the Rule. (Technically, the court upheld the exclusion of indexed annuities from PTE 84-24.) That case was Market Synergy Group, Inc. v. United States Department of Labor.
But the Fifth Circuit struck down the entirety of the Fiduciary Rule, saying that the Department of Labor exceeded its regulatory authority in stretching the meaning of “investment advice fiduciary” under the 1972 ERISA statute to include stockbrokers and insurance agents, 46 years after the statute was written.
The case may be revisited by the entire Fifth Circuit panel of judges (most cases are decided by just three, as was Chamber of Commerce). But due to the need to resolve the split in the circuits, the validity of the Fiduciary Rule may well go to the U.S. Supreme Court for a decision.
Another possible route is that the Department of Labor may give up, but let the Securities and Exchange Commission attempt some similar rules regarding stockbrokers. (The SEC does not regulate non-variable insurance products.)
You can learn details at lexology and NAPA. Overview and perspective is at the Wall Street Journal, The Hill, Forbes, Politico, and (behind firewalls) BenefitsPro and the National Law Journal. Some industry reaction, pro and con, is at Investment News.