After all the back-and-forth, public comments, lawsuits, time, money and resources, the Department of Labor’s fiduciary rule is officially dead.
The key phrase, however, is “Department of Labor,” as the SEC is busy developing its own version of the rule, although critics contend it will be (much) more industry-friendly and lacks the teeth of its DOL counterpart.
“On Wednesday, the last deadline for resuscitating the fiduciary rule passed when the government declined to ask the U.S. Supreme Court to reconsider the appeals court’s decision,” Bloomberg notes.
Not that it was much of a surprise, as the pro-business Trump Administration targeted the rule as part of its rollback of Obama-era regulations it undertook upon taking office.
Most recently, the DOL said in early May that it would not pursue prohibited transactions claims against fiduciaries “who are working diligently and in good faith to comply with the impartial conduct standards.”
It was the first release by the DOL in the aftermath of the bombshell ruling from the Fifth Circuit Court of Appeals that vacated the department’s rule, known officially as the Conflict of Interest Rule.
The Fifth Circuit, citing arguments made by plaintiffs groups—including the U.S. Chamber of Commerce, Financial Services Institute and the Financial Services Roundtable, among others—said in its 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 the 2 -1 decision, the court said, “The stated purpose of the new rule 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.”