U.S. District Court Judge Daniel Crabtree heard testimony for about 3.5 hours today on Market Synergy Group's lawsuit challenging the Department of Labor's controversial fiduciary rule.
According to an source who sat in on the hearing, the proceedings went smoother for the plaintiffs than did the Aug. 25 hearing in District of Columbia District Court. In that hearing, Judge Randolph J. Moss aggressively questioned Phillip D. Bartz, attorney for the National Association for Fixed Annuities.
Market Synergy's claim is much narrower, focusing on limited relief. The lawsuit challenges one aspect of the rule: the late addition of fixed indexed annuities to the Best Interest Contract Exemption.
Under the DOL's preliminary rule, FIAs remained under the Prohibited Transaction Exemption 84-24. The BIC is seen as more costly and restrictive, requiring extensive disclosures and a signed contract between advisor and client.
Market Synergy distributes FIAs and other insurance products through 11 IMO network members. Collectively, Market Synergy and these network members were responsible for approximately $15 billion of FIA sales in 2015.
“The fixed indexed annuity industry and the public at large were blindsided by the Department’s reversal of its original position,” the complaint reads. “It is one of the few components of the regulatory package that became more restrictive, prejudicial, and onerous in the final rulemaking than in the proposal.”
Based in Topeka, Kan., Market Synergy is represented by Carlton Fields Jorden Burt, a Washington, D.C., law firm. Reached after the hearing, a Carlton Fields attorney deferred comment.
Like two other lawsuits, Market Synergy seeks a preliminary injunction stopping the DOL rule from taking effect. The judge gave no indication when he would render a decision, the source said.
The final lawsuit is scheduled to be heard in a Dallas, Texas, court on Nov. 17.
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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