Judge Barbara M.G. Lynn will hear the third lawsuit this morning brought by opponents of the controversial Department of Labor fiduciary rule.
Lynn will gavel the public hearing in a Dallas courtroom. The lawsuit is one of three filed in the U.S. District Court Northern District of Texas. The complaints were consolidated with the U.S. Chamber of Commerce as lead plaintiff.
Separate cases already have been heard in District of Columbia District Court (Aug. 25) and District of Kansas District Court (Sept. 21). Judge Randolph D. Moss sided with the DOL in the former case, while Judge Daniel Crabtree has yet to rule on the latter.
The Dallas complaint differs slightly, said Erin M. Sweeney, a lawyer with Miller & Chevalier in Washington, D.C., who attended the two previous hearings.
“The biggest difference between the hearings is that the plaintiffs did not move for a preliminary injunction in the Northern District of Texas, instead opting to address all facets of the fiduciary rule globally,” she said via email.
The D.C. and Kansas plaintiffs focused more on the stunning DOL decision to move fixed indexed annuities into the Best Interest Contract Exemption.
Under the DOL's preliminary rule, FIAs remained under the Prohibited Transaction Exemption 84-24. When its final rule was published in April, FIAs surprisingly turned up under the BICE.
The BICE is seen as more costly and restrictive, requiring extensive disclosures and a signed contract between advisor and client.
In addition to the U.S. Chamber, other plaintiffs include the Indexed Annuity Leadership Council, the American Council of Life Insurers and the National Association of Insurance and Financial Advisors.
There’s a reason so many plaintiffs sought out the Texas court to file their lawsuits, Sweeney said, citing the “historical willingness of the Northern District of Texas to enjoin Department of Labor regulations.”
The surprise victory of President-elect Donald Trump has breathed new life into opposition efforts, she added. There is rampant speculation that the Trump administration will partner with majority Republican leadership in Congress to kill the rule.
While plaintiffs say they will make no changes to their court strategy, Sweeney said the Trump victory makes the lawsuits look “less like a Hail Mary pass and more like a backup plan.”
DOL officials and public interest groups say the rules, which impose a fiduciary standard of care on financial advisors dealing with retirement accounts, are necessary to protect retirement investors from high commissions.
Critics say the DOL is trying to force the industry to move from a commission- to a fee-based model. The rules are scheduled to begin taking effect April 10, 2017.
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]
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