NAIFA, Industry Allies Continue Challenge to DOL Fiduciary Rule

By Michael E. Gerber, NAIFA COO and General Counsel
On July 31, NAIFA’s ongoing legal battle against the DOL fiduciary rule was argued in the federal 5th Circuit Court of Appeals in New Orleans. In June 2016, NAIFA, NAIFA-Texas, and five NAIFA local associations in Texas (from Amarillo, Dallas, Fort-Worth, Great-Southwest, and Wichita Falls), joined the American Council of Life Insurers (ACLI) in challenging the DOL fiduciary rule because of grave concerns that the rule will – and now does – improperly reduce consumer access to professional retirement advice. The NAIFA-ACLI action was paired with two other financial services industry organization cases brought against the DOL fiduciary rule, by the Chamber of Commerce (and others) and the Indexed Annuity Leadership Council.
The industry groups’ objections to the DOL fiduciary rule were previously heard in federal district court in Dallas in November 2016, but the lower court judge disappointingly upheld the rule last February. The fiduciary rule then became partially effective in June and is currently scheduled to become fully operational in January 2018. In response to a directive from the Trump Administration, the DOL is currently seeking additional comments on the merits of the fiduciary rule and the timeline for its final implementation. In the midst of these developments, the continuing litigation brought by NAIFA and other major insurance and financial services organizations seeks to overturn the fiduciary rule completely.
During the hour-long 5th Circuit hearing, counsel for NAIFA and its industry allies argued that the DOL fiduciary rule should be vacated on several important grounds. Counsel persuasively explained why the rule is arbitrary, capricious, and contrary to law, due to the regulation’s overbroad definition of what constitutes a fiduciary relationship; its impermissible creation of a private right of action; its failure to account for existing regulations and to recognize the harm in restricting consumer access to certain retirement products; its reliance on dated and inapposite studies; and other flaws. Counsel also separately urged the court to vacate the DOL rule because it violates fundamental First Amendment protections for commercial speech, by putting special restrictions and burdens on conversations between advisors and their clients about retirement products.
In the majestic 5th Circuit courthouse, the crowded courtroom heard oral arguments for all three industry groups (NAIFA/ACLI; the Chamber of Commerce group; and IALC) by lead counsel Eugene Scalia of the law firm Gibson, Dunn & Crutcher. The prestigious panel of experienced judges included the Chief Judge of the Fifth Circuit, Carl E. Stewart (a Clinton appointee), Judge Edith H. Jones (a Reagan appointee who was previously the Circuit’s chief judge), and Judge Edith B. Clement (a George H.W. Bush appointee at the district court level and a George W. Bush appointee to the 5th Circuit).  The hearing was enlivened by an inquisitive panel that asked informed and pointed questions, which reflected their careful attention to the wide-ranging issues raised by this important case and resulted in spirited colloquy between the bench and counsel. Reflective of the complexity of the DOL regulation, the court concluded the hearing by asking counsel to submit additional briefs to clarify the meaning of certain subsections of the rule.
NAIFA's participation in this action is part of our commitment to leverage all three branches of government to seek public policy that allows NAIFA members to serve consumers at a time when the public’s need for financial security has never been greater. Joining this case is another way for NAIFA to ensure we leave no stone unturned in working for regulations that give American savers broad access to professional retirement advice. The case is also a powerful example of industry unity between NAIFA’s advisor community and the community of companies represented by the ACLI.
While the industry’s arguments against the DOL fiduciary rule are strong, there is no way to predict how the legal challenge will end. In the meantime, NAIFA members should continue to conduct their professional activities in a manner that is consistent with the DOL rule’s requirements for their interactions with clients seeking retirement advice and by following the compliance instructions of the insurance companies and broker-dealers they represent.
To help manage your practice in the DOL fiduciary rule environment, please attend a NAIFA Skill Builders DOL workshop in your state. NAIFA will continue to keep you updated on any regulatory or legislative developments concerning the DOL rule in GovTalk and in other NAIFA communications.
  • Posted August 1, 2017 IN

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