Fiduciary Rule Scores Another Court Win
While the fate of Department of Labor’s fiduciary rule remains in limbo under president Donald Trump, the agency continues racking up court wins against opponents of the rule. On Friday a Kansas appeals court ruled against insurer Market Synergy Group, Insurancenewsnet.com writes.
The rule, which requires retirement brokers to put clients’ interests first and was scheduled to go into effect in April, was met with several lawsuits from financial and insurance industry players. In the DOL’s most recent win, judge Daniel Crabtree ruled that the agency didn’t violate administrative procedures by including fixed indexed annuities under the rule’s best interest contract exemption clause, the web publication writes. The exemption lets retirement brokers sell some commission-based products after signing best interest contracts with their clients. Market Synergy had claimed that the DOL failed to give the insurer a chance to participate in the public comment period and that the inclusion of fixed indexed annuities in last April’s release of the final rule was a surprise, according to Insurancenewsnet.com.
In November, Crabtree had rejected Market Synergy’s request for a preliminary injunction against the rule.
In that ruling, Crabtree said the firm wasn’t likely to succeed on the merits of its claim that the DOL failed to follow appropriate administrative procedures. In Friday’s ruling, Crabtree upheld his previous decision, Insurancenews.net writes.
Last week’s win is the latest in a string of legal victories for the DOL. Earlier this month a Texas federal judge rejected a challenge from the U.S. Chamber of Commerce, Sifma and other industry groups who claimed the DOL exceeded its authority.
And in December a federal appeals court refused an injunction pending appeal filed by the National Association for Fixed Annuities. A month earlier a U.S. District judge had denied the group’s request to delay the implementation of the rule.
Meanwhile, the DOL filed for a stay in a separate lawsuit brought by Thrivent Financial, Insurancenewsnet.com writes. Thrivent isn’t opposed to the rule overall but has asked the court to remove its class-action component, according to the web publication. A Department of Justice attorney has asked Minnesota district court judge Susan Richard Nelson for a stay pending a review of the rule requested in early February by Trump, Insurancenewsnet.com writes.
The fate of the rule remains unclear. Following a memorandum from the president, the DOL is seeking a 180-day delay as well as a new public comment period.
But Trump’s original pick to head the DOL, Andrew Puzder, withdrew his nomination last week amid allegations that he had hired an undocumented immigrant worker and that his company engaged in wage theft.
Trump has since tapped Alexander Acosta, a former National Labor Relations Board member, to head the agency. Acosta’s confirmation is expected to go through with less opposition in the Senate than Puzder’s, but how the new nomination affects the review is still unclear.
Without a confirmed secretary to lead the department, some experts say the review of the rule will have to be delayed, although others say that DOL staff have to abide by the President’s request and go through with it.