A pair of high-profile securities trade organizations on Friday joined a federal lawsuit filed previously by nine other organizations opposing the Department of Labor’s controversial Retirement Security Rule. The move happened one week after the CFP Board filed an amicus brief in support of the rule in a different federal lawsuit (more below).
“The DOL rule not only lacks statutory authority, but also violates the Administrative Procedure Act because it lacks both rational justification and adequate cost-benefit analysis.”
FSI & SIFMA statement
The Financial Services Institute (FSI) and Securities Industry and Financial Markets Association (SIFMA) joined a federal lawsuit Friday in the Northern District of Texas, seeking to strike down the recently finalized DOL rule that they say unlawfully expands the definition of a “fiduciary” and jeopardizes investors’ access to advice and education.
In a June 28 joint press release, FSI and SIFMA said the legal complaint notes that the new rule is materially indistinguishable from a 2016 DOL rule that was struck down by the Fifth Circuit in 2018: “like the 2016 Rule, the 2024 Rule is inconsistent with the common law, contravenes the statutory text, and impermissibly attempts to regulate the provision of services to accounts over which the Labor Department has no regulatory authority. Indeed, the illegality of the 2024 Rule is even clearer today….”
The press release mentions that in 2019 the Securities and Exchange Commission (SEC)—the federal agency Congress actually created to regulate broker-dealers—adopted Regulation Best Interest (Reg BI), which the Department itself admits largely instituted the standards for broker-dealers that the Department’s 2016 Rule had (illegally) sought to impose.
“With Reg BI, the needs case for the Department’s unlawful regulation of broker-dealers vanished,” the release states. “The DOL rule not only lacks statutory authority, but also violates the Administrative Procedure Act because it lacks both rational justification and adequate cost-benefit analysis.”
Notably, the complaint does not challenge the prohibited-transaction exemption (PTE) 2020-02 (which some broker-dealers utilize in situations where they are fiduciaries under the Department’s 1975 test) or the Department’s recent amendments to that exemption.
FSI and SIFMA ask the Court to vacate and set aside the 2024 Rule and declare it to be in excess of the DOL’s statutory authority, arbitrary and capricious, and otherwise not in accordance with law.
The American Council of Life Insurers (ACLI), Finseca, Insured Retirement Institute (IRI), National Association for Fixed Annuities (NAFA), and the National Association of Insurance and Financial Advisors (NAIFA), as well as partners NAIFA-Texas, NAIFA-Dallas, NAIFA-Fort Worth, and NAIFA-POET, filed a lawsuit on May 24 in the U.S. District Court for the Northern District of Texas challenging the DOL’s fiduciary rule.
That filing accuses the ruling of being “contrary to law,” “arbitrary and capricious,” and “ultimately unconstitutional,” according to a joint statement addressing the suit.
The full FSI/SIFMA plaintiff-intervenors’ complaint filed in this case, American Council of Life Insurers, et al. v. United States Department of Labor, can be found here.
FSI bills itself as the only organization advocating solely on behalf of independent financial advisors and independent financial services firms. Since 2004, through advocacy, education and public awareness, FSI has successfully promoted a more responsible regulatory environment for over 80 independent financial services firm members and their 130,000+ affiliated financial advisors—which comprise over 45% of all producing registered representatives.
SIFMA is the leading trade association for broker-dealers, investment banks and asset managers operating in the U.S. and global capital markets.
CFP Board backs fiduciary rule
“While DOL’s opponents have expressed concern for moderate-income investors, CFP Board believes that their concerns are misdirected…”
CFP Board statement
On June 21, 2024, CFP Board filed an amicus brief in the U.S. District Court for the Eastern District of Texas, supporting the Department of Labor’s (DOL’s) fiduciary rule against challenges from those who seek to stop the rule from taking effect.
In a June 26 press release, CFP Board said it supports the Retirement Security Rule because the prior regulation has enormous gaps that leave Americans exposed to conflicted advice. “The stakes are high. Tens of billions of dollars are being taken from the American public by financial advice that is in the best interest of the advisor, not the investor,” the release reads.
It went on to say research demonstrates that investors expect to receive best-interest advice (including about rollover recommendations and other one-time recommendations) that is not tainted by conflicts of interest that increase costs and undermine the quality of the advice.
“While DOL’s opponents have expressed concern for moderate-income investors, CFP Board believes that their concerns are misdirected. Empirical research and CFP Board’s practical experience confirm that moderate-income investors retain ready access to financial advice when it is provided under a fiduciary standard,” the release concluded.
CFP Board filed the amicus brief in the district court case Federation of Americans for Consumer Choice, Inc.; James Holloway; James Johnson; TX Titan Group, LLC; Provision Brokerage, LLC; and V. Eric Couch v. United States Department of Labor and Julie Su, in her official capacity as Acting Secretary of Labor. The judge has not yet decided whether to accept any of the three amicus briefs that have been filed, including CFP Board’s.
CFP Board is the professional body for personal financial planners in the U.S., consisting of two affiliated organizations focused on advancing the financial planning profession for the public’s benefit: CFP Board of Standards, which sets and upholds standards for financial planning and administers the prestigious Certified Financial Planner (CFP) certification; and the CFP Board Center for Financial Planning, which addresses diversity and workforce development challenges and conducts and publishes research that adds to the financial planning profession’s body of knowledge.
The scheduled effective date for the DOL’s Retirement Security Rule is now less than 3 months away. The Final Rule and amendments to the Prohibited Transaction Exemptions (PTEs) are set to become effective Sept. 23, 2024, and will apply to investment advice provided on or after that date. The amended PTEs also include a one-year transition period.
SEE ALSO:
• Fiduciary Rule Update: Hearings, Lawsuits and Compliance Prep
• Nine Insurance Trade Groups Sue DOL Over Fiduciary Rule
• FACC Files Second Lawsuit Against DOL Fiduciary Rule
• Jerry Schlichter Preps Advisors for Fiduciary Rule Changes
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
