A summary of legal actions against the DOL fiduciary rule

December 6, 2017

We’ve seen several legal challenges to the DOL fiduciary rule. Find out what's happening with the court cases and what it means for financial advisors.

On June 7, 2016, the U.S. Department of Labor (DOL) put the final rule redefining an investment advice fiduciary under the Employee Retirement Income Security Act of 1974 (ERISA) into effect. Since then, six lawsuits in four federal courts have been filed against the DOL. The goal? To vacate the new fiduciary rule in whole or at least in part.

Four major arguments are being made against the rule:

  • The DOL didn’t comply with the procedures required by the Administrative Procedures Act of 1946 that governs agency rulemaking.
  • The DOL exceeded the rulemaking authority granted by Congress.
  • The rule unlawfully creates a private, legal cause of action.
  • The rule violates the First Amendment’s right to free speech by impermissibly burdening truthful commercial speech.

What's happened so far:

Court Plaintiffs Status
U.S. Court of Appeals for the Fifth Circuit

U.S. Chamber of Commerce, et al.

American Council of Life Insurers (ACLI) & National Association of Insurance and Financial Advisors (NAIFA)

Indexed Annuity Leadership Council

The federal district court denied the plaintiffs’ challenges to the Rule. The case is on appeal, and the parties are waiting for a decision.
U.S. Court of Appeals for the D.C. Circuit National Association of Fixed Annuities The federal district court denied the plaintiff’s challenges to the Rule. The case is on appeal, and oral argument occurred on December 8, 2017.
U.S. Court of Appeals for the Tenth Circuit Market Synergy Group The federal district court denied the plaintiff’s challenges to the Rule. The case is on appeal, and oral argument is scheduled for January 17, 2018.
U.S. District Court for the District of Minnesota Thrivent Financial The case is limited to a challenge to the Rule’s prohibition against class action waivers in the Best Interest Contract.

On November 3, 2017, the federal district court issued a preliminary injunction prohibiting the DOL and all other federal agencies from enforcing the prohibition against class action waivers to Thrivent, but allowing the DOL to complete its review of the Rule via its administrative process.

The parties are required to jointly file a status report every 60 days addressing whether a continued stay of proceedings is necessary.

What does this mean for financial advisors and their clients?

Financial advisors should continue to prepare for the rule regardless of the lawsuits. Because the final outcome isn’t certain, we encourage advisors to check back with us frequently to stay current on the latest updates.

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Disclosure

The views expressed are as of the date given, may change as market or other conditions change and may differ from views expressed by other Columbia Management Investment Advisers, LLC (CMIA) associates or affiliates.