DOL Fiduciary Rule Won’t Die, If AARP and Three States Can Help It
Just four days away from the deadline that the Department of Labor has to appeal the ruling vacating its fiduciary rule, attorneys general from three states and the AARP have filed motions to save the rule.
In mid-March, the FifthCircuitCourt of Appeals vacated the rule, which purports to require retirement account advisors to put clients’ interests first and went into partial effect last summer. Following that ruling, the DOL said it would not enforce even the parts of the rule already in effect, pending a review, and former executives at the agency have said the DOL now isn’t likely to fight for the rule.
But Thursday, state attorneys general from California, Oregon and New York filed a motion to intervene in the Fifth Circuit’s ruling, as did the AARP.
The attorneys general say the Fifth Circuit was wrong to rule that the DOL didn’t have authority to require advisors to individual retirement accounts to act in the clients’ best interest, and that the ruling conflicts with the decisions of three other courts that have previously upheld the rule, according to a press release from the office of California Attorney General Xavier Becerra.
In addition, the Fifth Circuit decision would cost California at least $38 million in lost taxes over the next decade, deprive millions of Americans of basic protections in getting financial advice and cost retirement savers billions of dollars, according to the press release. The attorneys general are asking for a rehearing before the entire bench off the court.
“American families saving their hard-earned money for retirement deserve to know that the advice they receive is unbiased and in their best interest,” Becerra says in the press release. “We cannot go back to the days when retirement advisors could put their own financial gain ahead of the best interests of their clients who sacrificed to save for retirement. We are ready to defend the fiduciary rule in court.”
The AARP, meanwhile, is asking the Fifth Circuit Court for permission to join a lawsuit filed by the U.S. Chamber of Commerce and several other trade groups opposed to the DOL’s fiduciary rule, according to a press release from the AARP.
Joining the suit would then allow the organization to ask for a rehearing of the Fifth Circuit case, AARP says.
“AARP is not giving up on our fight to make sure that hard-earned retirement savings have strong protections from conflicts and hidden fees,”Nancy LeaMond, AARP’schiefadvocacy andengagementofficer, says in the press release. “Many financial advisors already give advice with the public’s best interests in mind. But the recent court decision allows some financial advisors to provide guidance based on what’s best for their pocketbooks, not the consumers’.”
Meanwhile, SEC chairman Jay Clayton appeared before the Financial Services and General Government Subcommittee of the House Committee on Appropriations and clarified his stance on investment advisor regulations, according to FA magazine. Essentially, he said, investors aren’t entitled to conflict-free advice, according to the publication.
“With respect to an investment advisor’s fiduciary duty, let me be clear, because I believe there is substantial confusion in the marketplace,” Clayton said, according to FA magazine.“An investment advisor must seek to avoid conflicts of interest and at a minimum make full and fair disclosure of material conflicts. But it misstates the law and could mislead investors to suggest that investors currently have a legal right to conflict-free advice from an investment advisor.”