The Department of Labor agreeing not to enforce its fiduciary rule in the short term does not remove the threat to the financial services industry, a court brief filed Thursday argues.
A court-ordered injunction is the only means to prevent “massive costs and seismic changes” the DOL rule will bring to the industry, argued Eugene Scalia, attorney for the plaintiffs in a lawsuit filed in a Texas federal court.
Plaintiffs requested Judge Barbara M.G. Lynn render a decision by Monday. Lynn previously ruled in favor of the DOL.
Plaintiffs asked for the emergency injunction March 10 to delay the April 10 "applicability date" of the DOL fiduciary rule. That same day, the DOL released a bulletin alerting the financial services industry that it will not pursue enforcement of the rule in the short term.
Given the bulletin, Lynn asked plaintiffs Wednesday to explain why an injunction is even needed.
The fiduciary rule establishes a best interest standard of care for anyone working with retirement funds. It requires advisors and firms to make substantial disclosures or face class-action liability.
President Donald J. Trump ordered the DOL to delay the rule in a Feb. 3 memorandum. That 60-day delay could be published in the Federal Register later this month. In the meantime, the DOL re-assured the industry with its bulletin.
“Although the Bulletin is a commendable attempt to mitigate some of the confusion and expense created by the Rule’s uncertain status, it does not alleviate the irreparable harms that threaten Plaintiffs’ members and the financial services industry,” Scalia’s court brief argued.
'Not Long Enough'
Plaintiff’s argument makes three points:
• Even if the DOL postpones the applicability date for 60 days, “that 60-day extension is not long enough for this litigation to run its course, nor for the Department to complete its review of the Rule and to implement any changes that it finds necessary,” the brief reads.
• The Labor Department is not the only relevant enforcement authority. The Treasury Department, through the Internal Revenue Service, has enforcement authority over IRAs, and the bulletin states that it “does not address the rights or obligations of other parties.”
• The bulletin does little to address the long-term implications of the fiduciary rule. And the delay result won’t be known until just before the April 10 deadline. “As a consequence, they will be forced to incur the significant (and unrecoverable) pre-compliance costs,” the brief reads.
Other plaintiffs in the Northern District of Texas’ lawsuit include the Indexed Annuity Leadership Council, the American Council of Life Insurers, the Insured Retirement Institute, the Financial Services Institute, and the National Association of Insurance and Financial Advisors.
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@example.com.
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