Like Sherriff Buford T. Justice, the National Association for Fixed Annuities (NAFA) isn’t giving up. The insurance industry advocacy organization filed a strongly-worded motion for an emergency injunction on Tuesday to stay the deadline for implementation of the Department of Labor’s 401k fiduciary rule, known officially as the DOL Conflict of Interest Rule.
“Nearly six critical months have passed since NAFA first sought a preliminary injunction to delay enforcement of the ‘fiduciary rule’ promulgated by the United States Department of Labor,” NAFA writes in its motion. “April 10, 2017 is the ‘applicability date’ of the Rule. Given this looming deadline, NAFA urges the Court to preserve the status quo by staying the applicability date pending appeal.”
Otherwise, NAFA argues, its members will be “forced to accelerate irreversible, costly, and industry-altering actions in the weeks ahead to re-structure their entire distribution system, which has been in place for decades. This Court’s de novo review of this case would be rendered meaningless by the mere passage of time.”
“De novo review” means the appellate court will consider the case without being bound or influenced by the lower court’s decision.
In early November, NAFA announced that it would appeal the decision of a federal district court that upheld the implementation of the Department of Labor’s 401k fiduciary rule.
“We are obviously disappointed by the court’s decision, but we have always assumed this case would get decided by a higher court and we are pleased the issues will get de novo review by the Circuit Court,” Chip Anderson, Executive Director of NAFA, said in a statement at the time.
NAFA members face extraordinary challenges to comply with this flawed Rule, it states in its latest petition, which was “adopted improperly by DOL and foisted on the fixed annuity industry with a short time to comply.”
“The Rule inherently favors the securities industry, and the adverse impact on NAFA members is much more profound. The fixed annuity industry faces prohibitive compliance costs and uncertainty, in part because DOL has dragged its feet on critical exemption requests. The situation is even more unsettled due to the election of a new administration, which may consider delay or repeal of a Rule purposely designed to take effect in one administration but not to become “applicable” until the next.”
Accordingly, NAFA seeks a stay of the applicability date pending appeal “to alleviate what can only be described as chaos in the fixed annuity industry. In addition, NAFA asks this Court to order that the Rule will not become applicable for a stipulated period after this lawsuit is resolved, thereby allowing NAFA members time to comply if the Rule is ultimately upheld.”
Given the Rule’s profound impact, it concludes, “a post-litigation stay of as much as two years is warranted, but at a minimum NAFA seeks ten months. NAFA does not seek expedited review on appeal, because it would come too late absent an injunction; if an injunction is granted, expedited review would not be necessary.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
