NAIFA’s Day in Court to Challenge the DOL Fiduciary Rule

By Michael Gerber, NAIFA Chief Operating Officer

On November 17, NAIFA’s legal challenge to the DOL fiduciary rule was argued in federal district court in Dallas. In June, NAIFA, NAIFA-Texas, and five NAIFA local associations in Texas (in Amarillo, Dallas, Fort-Worth, Great-Southwest, and Wichita Falls), joined the ACLI in challenging the DOL fiduciary rule because of grave concerns that the rule will improperly reduce consumer access to professional retirement advice. The NAIFA-ACLI case was consolidated with two other cases brought against the DOL in Texas, by the Chamber of Commerce (and others) and the Indexed Annuity Leadership Council, and all three cases are before Chief Judge Barbara Lynn.
During the four-hour hearing, NAIFA and the other industry groups argued that the DOL fiduciary rule should be vacated for several different reasons. Counsel explained why the rule is arbitrary, capricious, and contrary to law, due to its overbroad definition of “fiduciary” and its impermissible creation of a private right of action to enforce the regulation. In addition, the plaintiffs argued that the DOL failed during the rulemaking process to give proper notice, or to perform a sufficient cost-benefit analysis, about the rule’s treatment of different types of annuities. Counsel also urged the court to vacate the DOL rule because it violates First Amendment protections for commercial speech, by putting special restrictions and burdens on conversations between advisors and their clients about retirement products.
Before a packed courtroom, the oral arguments featured a compelling presentation by counsel for NAIFA and ACLI (David Ogden of the law firm WilmerHale), coupled with thorough arguments by counsel for the Chamber and IALC. Chief Judge Lynn asked informed and pointed questions throughout the hearing, which reflected her careful attention to the wide-ranging issues raised by this important case. The government was represented by counsel from the Department of Justice and the Department of Labor, and DOL Assistant Secretary of Labor Phyllis Borzi attended the full hearing.
The parties acknowledged that different cases against the DOL fiduciary rule are also underway in other federal courts, including a recent decision in D.C. district court upholding the rule, in an action brought by the National Association of Fixed Annuities, which will be appealed to the D.C. Circuit Court of Appeals. At the Dallas hearing, plaintiffs’ counsel noted how their arguments differed from those raised in the D.C. case, and provided a persuasive rationale for a different result. Other cases are pending in federal district courts in Kansas and Minnesota, but they have not yet had decisions.
NAIFA members were well-represented at the Dallas hearing, with leaders from NAIFA-Texas, NAIFA-Dallas, and other NAIFA Texas associations in attendance to show their support for the association’s case, along with NAIFA National President Paul Dougherty and NAIFA national staff.
NAIFA's participation in this lawsuit is part of its strategy to leverage all three branches of government to seek public policy that allows NAIFA members to serve consumers. NAIFA’s case is another way to make sure 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 our arguments against the DOL’s fiduciary rule are strong, there is no way to predict how the legal challenge will end. Likewise, we do not know with certainty how the new administration and Congress will treat the rule in the coming months. In the meantime, NAIFA members should plan for their professional future by assuming that the DOL rule is going to apply to their interactions with clients seeking retirement advice. The rule is the law of the land until some arm of the government decides otherwise.
To prepare your practice for the DOL fiduciary rule environment, please attend a NAIFA Skill Builders DOL workshop in your state (information is available at 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 November 21, 2016 IN

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