“The Court will deny NAFA’s motions for a preliminary injunction and summary judgment.”
With that, U.S. District Judge Randolph Moss handed the National Association for Fixed Annuities, or NAFA, a defeat in the first challenge to the Department of Labor’s fiduciary rule, known formally as the Conflict of Interest Rule.
NAFA contended that the Labor Department overstepped its authority in crafting the regulation known as the “fiduciary rule,” which it said would have an “immediate and devastating effect” on its industry, according to The Wall Street Journal.
“Among the lawsuits the Labor Department faces, the most significant is a complaint filed in a federal court in Texas by several major industry groups, including the U.S. Chamber of Commerce, the Securities Industry and Financial Markets Association and the Financial Services Roundtable,” the paper reports. “A hearing in that case is scheduled for Nov. 17.”
According to the DOL’s rule, advisors are considered a fiduciary if “they receive compensation for making investment recommendations that are individualized or specifically directed to a particular plan sponsor running a retirement plan, plan participant, or IRA owner.”
The change expands protections to IRA owners and people rolling over their savings into an IRA from a 401(k), who now must receive investment advice in their best interest.
NAFA’s key claims in the case included:
- The DOL rule is invalid on grounds that the agency exceeded its authority to regulate IRAs and that it improperly categorizes insurance agents as fiduciaries.
- The rule creates a private right of action, which only Congress can do.
- DOL’s decision to include fixed indexed annuities (FIAs) under the Best Interest Contract Exemption (BICE) in the final rule, with no opportunity for meaningful comment and without adequate justification, was arbitrary and capricious.
- The timeline for the rule’s implementation is unreasonable and unworkable.