The financial services industry has waited months for a ruling on a promising appeal of the Department of Labor fiduciary rule.
They might be waiting for a lot longer, said one legal expert. The Fifth Circuit Court of Appeals in New Orleans might have shelved its appeal decision while the DOL completes a review of the controversial fiduciary rule, said Bruce L. Ashton, lawyer with Drinker, Biddle & Reath in Los Angeles.
The final implementation of the DOL rule was delayed from Jan. 1, 2018, to July 2019. In the interim, the Trump labor department is expected to weaken the more onerous parts of the rule. That work has just begun.
"It may be that the court is simply delaying issuing the ruling to see what happens in the regulatory process," Ashton said. "To me, that makes some sense, rather than the courts imposing some different view."
The appeals court heard arguments July 31, and most industry experts predicted a ruling by the end of 2017 at the latest. Federal appeals courts are under no time constraints when it comes to rulings, Ashton said.
Plaintiffs include the U.S. Chamber of Commerce, American Council of Life Insurers, National Association of Insurance and Financial Advisors, the Insured Retirement Institute, and many others.
After losing a string of court decisions in several states, DOL rule opponents were confident of redress in the Fifth Circuit.
The industry plaintiffs are consolidated from three lawsuits that were filed in 2016 in U.S. District Court for the Northern District of Texas. While the plaintiffs lost the federal court decisions, the Dallas court was chosen specifically because appeals would go to the Fifth Circuit.
The Fifth Circuit is generally considered the most conservative in the country, with decisions that frequently define the government’s role narrowly.
The first phase of the fiduciary rule went into effect June 9. It requires advisors and agents to act as fiduciaries, make no misleading statements and accept only “reasonable” compensation.
Still, opponents are aiming mostly at phase two rules that establish a class-action right to sue under the Best Interest Contract Exemption, and require the BICE to sell popular variable and fixed indexed annuities.
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].