We can’t blame The Wall Street Journal for its hot take on what all happened with the Fifth Circuit Court’s damning fiduciary decision.
The paper’s excoriation Monday of the Department of Labor’s Conflict of Interest Rule was couched as criticism of Obama-era regulation overall, and relief over the resulting rollback, of which the court’s decision reinforced (allegedly).
“The Obama Administration sold its fiduciary rule to the public as protecting retirees. This was never true, but now we learn it also was illegal, as the Fifth Circuit Court of Appeals explained last week in a tart decision striking down the rule,” the Journal argued.
Noting Dodd-Frank prohibits the SEC from banning commissions, the Labor Department under Tom Perez “usurped the SEC and wrote a rule that ignored that prohibition,” one reason it was vacated.
It wasn’t so much what the judges wrote but how they wrote it, an indication of their true feelings over the rule’s legal merit.
In unusually harsh language, Circuit Judge Edith Jones called it a “regulatory abuse of power” that stemmed from a discovery the DOL supposedly made in “a long-extant statute” that implied or indicated “an unheralded power to regulate a significant portion of the American economy.”
The rule was problematic from the start, with even its supporters admitting to imperfections but pushing forward nonetheless, arguing some rule is better than no rule and it might be the best we get.
All well-and-good, but if it hurts those it intends to help what’s the point? Regulation for regulation’s sake is exactly why so much of was quashed recently by courts (thankfully).
It’s not to say a fiduciary rule isn’t warranted; far from it. It’s just not this rule.
We’re partial to comments 3ethos CEO Don Trone made in testimony in a DOL hearing in 2015—which now seems like eons ago given all that’s happened.
He was of the unpopular opinion (not that Don ever cared) that the DOL rule could not be effectively implemented, especially for smaller accounts, and that it wouldn’t have stopped a Bernie Madoff from swindling the ultra-wealthy.
Regardless of the recent decision, the fight is far from over, one reason The Wagner Law Group advises “the prudent and best course of action for the moment is to maintain existent efforts to satisfy the Impartial Conduct Standards when relying on the BICE or other exemptions and to characterize advisers as a fiduciary (or not) pursuant to the terms of the Fiduciary Rule and its exceptions and exclusions.
“The legal and policy landscape is very uncertain and is likely to remain so for the near future.”
That much we know.