Sunday, July 01, 2018

Department of Labor's fiduciary rule for investment advisers killed by Fifth Circuit Court of Appeals

CNBC noted of the Fifth Circuit decision on the DOL fiduciary rule:

The U.S. Fifth Circuit Court of Appeals confirmed on Thursday 28 June 2018][its decision to vacate the Department of Labor's so-called fiduciary rule.


In April, the SEC said it planned to propose a best-interest standard for investment advisers and broker-dealers that make recommendations to retail investors. The agency also opened the proposal up for a 90-day comment period.

The Securities Industry and Financial Markets Association, a trade group that represents banks and asset management and securities firms, praised the court's decision.

"We are pleased the Fifth Circuit today issued its mandate," SIFMA president and CEO Kenneth E. Bentsen, Jr. said in a prepared statement. "The SEC, not the DOL, is the appropriate regulator in this area, and we look forward to working with the SEC on the current proposed rule-making to establish a best interest standard across all accounts, and not just retirement accounts."

Knut Rostad, president of the Institute for the Fiduciary Standard, a non-profit research, education and advocacy organization, called the court's decision "tragic."

"It's clear consumers are on their own," Rostad said.

From the dissent in 885 F.3d 360; 2018 U.S. App. LEXIS 6472; 63 Employee Benefits Cas. (BNA) 1957

Over the last forty years, the retirement-investment market has experienced a dramatic shift toward individually controlled retirement plans and accounts. Whereas retirement assets were [**65] previously held primarily in pension plans controlled by large employers and professional money managers, today, individual retirement accounts ("IRAs") and participant-directed plans, such as 401(k)s, have supplemented pensions as the retirement vehicles of choice, resulting in individual investors having greater responsibility for their own retirement savings. This sea change within the retirement-investment market also created monetary incentives for investment advisers to offer conflicted advice, a potentiality the controlling regulatory framework was not enacted to address. In response to these changes, and pursuant to its statutory mandate to establish nationwide "standards . . . assuring the equitable character" and "financial soundness" of retirement-benefit plans, 29 U.S.C. § 1001, the Department of Labor ("DOL") recalibrated and replaced its previous regulatory framework. To better regulate conflicted transactions as concerns IRAs and participant-directed retirement plans, the DOL promulgated a broader, more inclusive regulatory definition of investment-advice fiduciary under the Employee Retirement Income Security Act of 1974 ("ERISA") and the Internal Revenue Code ("the Code").

Despite [**66] the relevant context of time and evolving marketplace events, Appellants and the panel majority skew valid agency action that demonstrates an expansive-but-permissible shift in DOL policy as falling outside the statutory bounds of regulatory authority set by Congress in ERISA and the Code. Notwithstanding their qualms with these regulatory changes and the effect the DOL's exercise of its regulatory authority might have on certain sectors of the financial services industry, the DOL's exercise was nonetheless lawful and consistent with the Congressional directive to "prescribe such regulations as [the DOL] finds necessary or appropriate to carry out [ERISA's provisions]." 29 U.S.C. § 1135. Because I do not share the panel majority's concerns about the DOL's amended regulatory framework, I respectfully dissent.


Of patent relevance, note the beginning of the Edith Jones opinion in Chamber of Commerce v. DOL:

As might be expected by a Rule that fundamentally transforms over fifty years of settled and hitherto legal practices in a large swath of the financial services and insurance industries, a full explanation of the relevant background is required to focus the legal issues raised here.

and then think about the rise, and fall, of ED Texas for patent litigation.

link to cnbc story story:

Separately, from blawgsearch on 1 July 2018:


Post a Comment

<< Home