The Fifth Circuit Court of Appeals may have put the final nail in the coffin of the Department of Labor’s Conflict of Interest Rule, better known as the fiduciary rule. On Wednesday, it denied attempts by the AARP—as well as California, New York and Oregon—to revive the case in court.
Plaintiffs in the original court case—including the U.S. Chamber of Commerce, Financial Services Institute, Financial Services Roundtable, Insured Retirement Institute, and Securities Industry and Financial Markets Association—released a joint statement, hailing the decision and promoting the SEC’s version of the rule:
“We are pleased the Fifth Circuit denied the motions to intervene, and that the Department of Labor’s unlawful 2016 fiduciary rule is at an end. The SEC, not the DOL, is the appropriate regulator in this area, and we look forward to working with the SEC on the current proposed rulemaking to establish a best interest standard across all accounts, and not just retirement accounts.”
The Fifth Circuit struck down the Department of Labor’s fiduciary rule in March, sending shock waves throughout the investment and retirement savings industries.
The court, citing arguments made by plaintiffs groups, said in its March opinion that “…we REVERSE the judgment of the district court and VACATE the Fiduciary Rule in toto.”
“As might be expected by a Rule that fundamentally transforms over fifty years of settled and hitherto legal practices …a full explanation of the relevant background is required,” the judges wrote before launching into a comprehensive explanation of just that, beginning with a Congressional passage of ERISA’s in 1974.
In its 2 -1 decision, the court said, “The stated purpose of the new rules is to regulate in an entirely new way hundreds of thousands of financial service providers and insurance companies in the trillion dollar markets for ERISA plans and IRAs.”