States Ask For Review Of DOL Rule Overturn

California, New York and Oregon filed a last-minute, long-shot appeal for a court to reconsider its request for a full review of its decision to toss the Department of Labor fiduciary rule.

The Fifth Circuit Court of Appeals had denied the states' request for appeal in a May 2 decision. Wednesday was the deadline for the states to appeal that decision.

In its appeal, the states' attorneys noted that the federal government is not appealing the Fifth Circuit's March 15 decision tossing out the controversial Obama-era fiduciary rule.

"Given that posture, the exceptional importance of the issues, and the grave harm the States will suffer as a result of the panel opinion -- billions of dollars in lost retirement income to their residents and tens of millions of dollars in lost tax revenue -- the States respectfully request that the Court reconsider its decision," the appeal reads.

"If the panel declines to reconsider its order denying intervention, the States ask that the Court direct the Clerk to permit the filing of a petition seeking review of that order by the full Court."

The U.S. Chamber of Commerce, Financial Services Institute, Financial Services Roundtable, Insured Retirement Institute, and Securities Industry and Financial Markets Association are the plaintiffs in the original lawsuit that made its way to the Fifth Circuit on appeal. Those organizations released the following statement:

“The 5th Circuit has already denied the States’ motion for leave to intervene, and any request for rehearing is without merit.”

New York officials vowed to keep fighting for higher standards for financial advice. The state Department of Financial Services put forth the toughest state regulations in the country, which officials hope to adopt as law later this year.

“The Fiduciary Rule is critical to protecting New Yorkers and Americans – ensuring that financial advisors act in their clients’ best interests, rather than their own,” said acting Attorney General Barbara Underwood.

The states are asking for a full review in front of the entire Fifth Circuit court, known as an en banc review. The Fifth Circuit's 2-1 decision came down March 15, reversing several losses by industry opponents in courts from Kansas to Washington, D.C.

Judge Edith H. Jones wrote in the majority opinion that the DOL rule "fails the reasonableness test" of the Administrative Procedures Act by extending the department's ERISA authority to one-time IRA rollovers and similar transactions.

The decision went on to admonish the DOL for exceeding its authority and re-affirmed the role of Congress and the Securities and Exchange Commission in regulating agents and advisors.

The DOL rule was created by the Obama administration, but President Donald J. Trump ordered the DOL to delay and further study the rule soon after taking office.

Parts of the rule went into effect June 9, but the more stringent exemptions needed to sell variable and fixed indexed annuities were 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].

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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.