As the financial services industry eagerly awaits decisions from the bench, thoughts are turning to appeals in lawsuits filed against the Department of Labor's fiduciary rule.
The first lawsuit by the National Association for Fixed Annuities – requesting a preliminary injunction stopping the entire rule – was heard Aug. 25 in District of Columbia District Court. A decision is expected any day from Judge Randolph D. Moss.
Erin Sweeney, a Washington lawyer who is not involved in the case, said she expects Moss' decision will be appealed. Even in the best-case scenario, that could drag the case out well into 2017.
Timing is crucial since the rule will begin taking effect in April 2017.
“It is likely that the losing party will file a motion for an expedited appeal,” said Sweeney, of the firm Miller & Chevalier. “Even if the circuit court agrees to an expedited appeal, obtaining a decision on appeal would, at a minimum, take several months.”
Sweeney attended the NAFA hearing. She is among those who say the judge seemed unconvinced by the plaintiff’s case. If NAFA does not obtain an injunction from the district court, it “will find itself in front of the D.C. Circuit, which is unlikely to reverse the district court,” she explained.
The DOL published new fiduciary rules in April. The rules cover advice provided in regard to qualified retirement employer-sponsored plans and individual retirement accounts.
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.
Four court cases are active and two hearings have been held. A judge in the District of Kansas case – Market Synergy Group vs. Department of Labor – signaled Wednesday that he wishes to move quickly.
In a notice to attorneys, Judge Daniel Crabtree rejected a proposed telephone status conference.
“The court finds that the better course of action is to proceed with ruling on the pending motion for preliminary injunction before setting a schedule for the remainder of the case,” the notice reads.
The 3 1/2-hour hearing Sept. 21 in Kansas City appeared to go very well for the plaintiffs, several analysts have said.
MSG is taking a nuanced stand with its request for a preliminary injunction, citing irreparable harm if fixed indexed annuity sales require a Best Interest Contract Exemption.
Under the DOL's preliminary rule, FIAs were placed under the Prohibited Transaction Exemption 84-24. When its final rule was published in April, FIAs surprisingly turned up under the more stringent BICE.
Judge Barbara M.G. Lynn will hear the former case Nov. 17 in a Dallas court. No date has been set for the latter case.
InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at firstname.lastname@example.org.
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