Appeals Court Upholds DOL Rule in Market Synergy Group Ruling

By John Hilton

DOL fiduciary rule opponents suffered another loss Wednesday when the Tenth Circuit Court of Appeals upheld a lower court ruling.

Plaintiff Market Synergy Group (MSG) cited irreparable harm if fixed indexed annuity sales require a Best Interest Contract Exemption. In February, Judge Daniel Crabtree granted a summary judgment to the DOL, ruling that the agency did not violate the Administrative Procedures Act in developing and publishing its fiduciary rule.

The appeals court concurred.

"The DOL considered both sides of this issue and ultimately decided to treat FIAs differently than fixed rate annuities because of their risk, complexity and conflicts of interests," the court ruled in a 16-page decision. "It did so with evidentiary support in the record."

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.

MSG claimed the industry was denied a chance to provide input on the change during the public comment period.

“Because the Department never indicated that it might view [FIAs] as dissimilar from other fixed annuities or discussed [FIAs] in its notice, nobody submitted a comment on that issue,” wrote J. Michael Vaughan of Walters Bender Strohbehn & Vaughan, an attorney for MSG.

Judges in Washington, D.C., and Kansas federal courts previously upheld the fiduciary rule, which establishes a fiduciary standard of care for anyone working with retirement funds.

Another appeal was heard in July by the Fifth Circuit Court in New Orleans, but the panel of judges has not issued a ruling.

President Donald J. Trump ordered the DOL to delay and further study the rule. While parts of the rule went into effect June 9, the exemptions are delayed until July 2019.

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].

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]. Follow him on Twitter @INNJohnH.