The Fifth Circuit Court of Appeals in New Orleans issued a long-delayed final mandate today officially killing the Department of Labor fiduciary rule.
The simple three-sentence mandate was issued at 11:10 a.m. As he did in the original opinion, Chief Judge Carl E. Stewart dissented.
Considered a formality to be issued in early May, the mandate comes amid heightened speculation that the court was considering rehearing the case.
“Advisors can now confidently move forward, helping their clients prepare for retirement without the shadow of the rule looming over them," said Kevin Mayeux, CEO of NAIFA, among the plaintiffs.
“This is a good day for consumers as well as advisors,” Mayeux added. “The court’s decision does away with restrictions that had placed unnecessary barriers between advisors and their clients and would have made it more difficult for people of moderate or modest means to get help with retirement planning and preparation.”
The mandate reverses all DOL rule standards that went into effect June 7, 2017. Those impartial conduct standards constituted phase one of the fiduciary rule and required advisors to act in the best interest of clients, make no misleading statements and accept only reasonable compensation.
The second phase of the DOL rule was slated to take effect July 1, 2019, after it was delayed by the Trump administration.
Instead, the Fifth Circuit vacated the rule after a group of industry plaintiffs -- including the U.S. Chamber of Commerce and the National Association of Insurance and Financial Advisors -- appealed a lower-court decision.
“While we welcome today’s announcement, we recognize that the courts are not the best forum for policymaking. ACLI and NAIFA support reasonable and appropriately tailored rules that require all sales professionals to act in the best interest of their customers," read a statement released by the American Council of Life Insurers, another plaintiff.
The Fifth Circuit, based in New Orleans, is known for its narrow view of government powers of regulation. It heard the case in July 2017 and took eight months to reach its decision.
Writing the majority opinion, Judge Edith H. Jones said the DOL rule "fails the reasonableness test" in extending its ERISA authority to one-time IRA rollovers and similar transactions.
Now the industry will turn its attention to the Securities and Exchange Commission, which is accepting comment on its Regulation Best Interest. That rule is not a fiduciary rule, but SEC staff maintains it will hold brokers to a best-interest standard.
The SEC rule has no impact on insurance, analysts have said.
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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