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Financial Industry Groups Sue To Stop DOL Fiduciary Rule Implementation
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Just as we went to press, we learned that several financial industry groups have sued the Department of Labor in an effort to block implementation of its new fiduciary standard rule.

Reuters broke the story early on June 2nd that several industry groups, including SIFMA, the U.S. Chamber of Commerce, the Financial Services Institute, the Financial Services Roundtable and the Insured Retirement Institute, had on June 1st sued in the U.S. District Court, Northern District of Texas to block implementation. Why the suit? A joint Press Release issued June 2nd contains a joint statement by the organizations’ CEOs stating: “Our organizations are now asking a court to review whether the Department of Labor overstepped its boundaries, creating a rule that will leave Americans with fewer retirement choices, higher costs and reduced access to professional financial advice. Further the ‘private right of action’ mechanism creates significant new legal risk for financial advisors, who will face the threat of class action lawyers challenging their every move.”

An Alternate Path?

In SAA 2016-20, we reported that on May 24th the Senate passed by a 56 to 41 vote S.J.Res. 33. The joint resolution, passed by both houses of Congress, states: “Resolved by the Senate and House of Representatives of the United States of America in Congress assembled, that Congress disapproves the rule submitted by the Department of Labor relating to “Definition of the Term ‘Fiduciary’; Conflict of Interest Rule—Retirement Investment Advice” (published at 81 Fed. Reg. 20946 (April 8, 2016), and such rule shall have no force or effect.” On April 28th the House had passed H.J.Res. 88 by a 234 -183 vote strictly along party lines. Finally, in SAA 2016-16, we reported that on April 27th the White House’s Office of Management and Budget issued a statement promising a presidential veto of the resolution if it passes. Our last editorial comment on the topic was: “We are still sticking with our previous editorial comment: ‘Given President Obama’s strong support of the DOL’s fiduciary rule, we see no chance that he will sign this bill if it’s approved by Congress.’ At this point, votes for a veto override in the Senate and House don’t seem to be present in either body.” Perhaps securities industry leaders agreed with our observation, and are taking this alternate route to block the rule.

Postscript: PIABA Weighs in

Late on June 2nd the Public Investors Arbitration Bar Association issued a Press Release condemning the suit. President Hugh Berkson said “The securities industry's latest attack against the Department of Labor (DOL) fiduciary duty rule – a lawsuit filed in Federal court in Dallas – is no surprise.  This is a last-ditch attempt by an industry to keep its undisclosed conflicts of interest and ability to continue to push inappropriate and high-cost products upon unsuspecting investors. Lining the pockets of brokers instead of promoting the interests of retirement savers promotes no good public interest... We know where the public interest lies in this matter.  The fact that it does not coincide with the commission-driven mentality of the brokerage industry is nowhere near a sufficient reason for striking down the eminently reasonable and fair DOL rule.”

(ed: The 74-page complaint can be found here.) (SAC Ref. No. 2016-21-02)

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