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Nov. 25 — The Department of Labor’s fiduciary rule won’t be delayed while a federal appeals court considers a legal challenge to the rule, a federal judge concluded ( Nat’l Ass’n for Fixed Annuities v. Perez , 2016 BL 391590, D.D.C., No. 1:16-cv-01035-RDM, 11/23/16 ).
After upholding the rule three weeks earlier from a legal challenge brought by the National Association for Fixed Annuities, Judge Randolph D. Moss on Nov. 23 refused to put the rule on hold while NAFA appealed to the U.S. Court of Appeals for the D.C. Circuit. Moss reasoned that a party seeking a preliminary injunction must show that it is likely to succeed on the merits of the case and NAFA already lost this case on the merits in his earlier ruling.
Despite this decision, the future of the DOL’s fiduciary rule—which is aimed at reducing the allegedly conflicted investment advice given to retirement savers—remains uncertain. Five other pending lawsuits challenge the rule under a variety of legal theories, with no decisive rulings issued to date. The Obama administration regulation also faces an uncertain future after the presidential election of Donald J. Trump, following comments by Trump adviser Anthony Scaramucci in October that “we’re going to repeal” the fiduciary rule.
In seeking a preliminary injunction, NAFA argued that the fiduciary rule would require a “fundamental restructuring” of the fixed indexed annuities industry and that “thousands of independent agents will leave the business.”
Moss agreed that the rule was likely to cause “significant changes” in how the industry operates. Moss envisioned “substantial compliance costs,” changed business practices and “economic losses” stemming from lower commissions and “altered competition in the marketplace.”
However, Moss said that these changes were no reason to block enforcement of the rule, given the DOL’s “reasonable conclusion” that retirement investors will “likely be harmed” if the rules don’t take effect.
Moss’s decision was entered in the U.S. District Court for the District of Columbia. The next word on the fiduciary rule may come from a federal court in Kansas, which in September held a hearing in a similar case brought by insurance company Market Synergy Group Inc. Lawsuits brought by the U.S. Chamber of Commerce, the American Council of Life Insurers and the Indexed Annuity Leadership Council were heard by a Texas-based federal judge on Nov. 17 and another lawsuit is pending in a Minnesota federal court.
NAFA was represented by Jacob A. Kramer and Philip D. Bartz of Bryan Cave LLP in Washington. The DOL was represented by Emily S. Newton and Galen N. Thorp of the Department of Justice in Washington.
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Text of the decision is at http://www.bloomberglaw.com/public/document/Natl_Assn_for_Fixed_Annuities_v_Perez_No_161035_RDM_2016_BL_39159.
Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.
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